Marx, Classical Political Economy and the Problem of Dynamics - Henryk Grossman 1941


The discovery which was only made by the most advanced minority faction of the currently dominant theory -and only then after the violent disturbances of the World War - namely that a dynamic reality cannot be explained by arguments based on ideas of equilibrium, had already been stated by Marx in 1867 in the theory of the "dual character of labour". This theory was argued through to its conclusion in Volume II of Capital, in the theories dealing with the various circuits of capital, and with the turnover time of capital. Marx was obliged to set foot here on a terrain that had never been entered before, and create all the categories and concepts which were connected with the time element (circuit, turnover, turnover time, turnover cycles); and he was completely justified in reproaching the Classical economists for having neglected the analysis of the time element -the form of the circuits and of turnover.[1] Such a disregard was understandable given the purely value-oriented mode of observation which they employed. In contrast to this, Marx's conception of the dual character of all economic phenomena compelled him to look at the economy in its specific movement, not statically. The reason for this is that the capital which is advanced in the form of money can only maintain itself and grow by changing its natural form in the circuit, transforming itself from the money form into the form of the elements of production, and from these into the form of finished products, commodities. Capital must spend a given minimum period of time in each of these three stages before passing on to the next phase -a period which is objectively determined by the techniques of the processes of production and circulation. Capital "is a movement, a circuit-describing process going through various stages... Therefore it can be understood only as motion, not as a thing at rest".[2] The "production time" which was presented in Volume I of Capital is now followed, in Volume II, by an analysis of "circulation time";[3] this not only has effects on the size of profit, but also gives Marx the opportunity to deal with the actual form of motion as such[4] - the question of the duration of the circuits, be this either in their coincidence or in their sequence, i.e. the conditions for the undisturbed transition from one stage to the next. "The circuit of capital can only proceed if the various phases can succeed each other without interruption".[5] Marx demonstrates the theoretical conditions for such a normal circuit, conditions which in reality are only achieved by way of exception: the undisturbed course of the process requires the co-existence of capital in all its three natural forms. The normal "succession" of each part is conditioned by the "co-existence" of capital, i.e. by its constant presence in all the three forms: as money-capital, productive-capital, and commodity capital, and by the proportional division into each of these forms.[6] This simple formulation serves to hide the problem of dynamics. The "coexistence" of the three forms of capital is identical with their synchronisation, and hence presupposes given, and unchanged values -because they all fall into the same unit of time. This is the only instance when one can really speak of the "unity of the three circuits".[7] In contrast to this, "succession" is a process in time, and consequently embraces the possibility of revolutions in value of the individual parts of capital, which must hinder the smooth transition of capital from one phase to another.[8] Hence, according to Marx, equilibrium would only be possible under the unrealistic assumption of the constancy of both values and techniques.[9] Since in reality this condition cannot be realised, the circuit of capital must move "abnormally", i.e. in disequilibrium.


The entire presentation is crowned by the analysis of the "turnover of capital", where the circuit of capital through all three stages is to be understood "not as an isolated process, but as a periodic process". The duration of this turnover, given by the sum of production time and circulation time, is called "turnover time", and measures "the interval of time between one circuit period of the entire capital-value and the next, the periodicity in the process of the life of capital or, if you like, the time of the renewal, the repetition, valorisation or production of one and the same capital-value".[10] Finally, following the presentation of the turnover of individual capitals, Marx arrives at the presentation of "Aggregate Turnover of Advanced Capital. Cycles of Turnover",[11] which he uses within the overall argument, to stress those elements which work in the direction of disequilibrium.


In his schemes of reproduction Marx proceeds on the assumption of an identical turnover time of one year for all capitals in all branches of production. But whereas for the dominant theory the synchronisation of all movements represents a definitive methodological observation, for Marx it merely represents a preliminary, simplifying assumption, a first step in the process of getting closer to reality. He later acknowledges the fact that in reality "the turnover times of the capitals vary according to the sphere of investment", with the variation in turnover time being dependent on the natural and technical conditions of production of each species of commodity (natural produce, leather etc.).[12] In addition to these circumstances which are the product of the process of production and "which distinguish the turnover of different capitals invested in different branches of industry" we have to add those which are the product of conditions in the sphere of circulation (for example, improved means of transport and communication, which serve to reduce the travelling time of commodities).[13] It is clear that all these variations in total turnover times must produce a disequilibrium in the system, when one recalls that the original equilibrium in the equations for the schemes of reproduction only held under the assumption of an equal turnover time for all capitals.


And on top of these sources of disequilibrium, which flow from variations in the total turnover time of the capitals in the various branches of production, come additional differentiating factors within each branch of production, due to the different turnover times for the fixed and circulating parts of capital. As regards circulating capital, Marx analyses the temporal relation between the working period and the period of turnover, since the size of the circulating capital which functions through each of these periods is determined by their respective durations. Out of the three possible variants-that the working period is the same as, longer than or shorter than the period of circulation[14] -only one allows the undisturbed transition of the capital functioning in the working period into the circulation-phase, namely the first, "where the working period and the circulation time each constitute equal halves of the period of turnover".[15] The same applies in the case where each of the periods may not in fact be equal, but where the period "is an exact multiple" of the working period: for example, where the working period is three weeks, and the period of circulation six, nine or twelve weeks.[16] The process of turnover only proceeds "normally" under these "exceptional circumstances", which in reality only occur by chance.


In all the other cases, i.e. for the majority of the social circulating capital, a modification to the "normal course" occurs during the one year, or more than one year, cycle of turnover. This takes the form of the "release" or "tying up" of the advanced circulating capital,[17] and creates the objective basis and subjective impulse towards the expansion, or contraction, of the given scale of production itself, in place of the originally assumed "normal" transition from the working period to the period of circulation, at an unchanged scale of production. These impulses do not come from outside, but are endogenous, "through the sheer mechanism of the movement of turnover", i.e. from the temporal differences between the working period and the period of circulation.[18] Far from being a primary cause of changes in the scale of production (as is supposed by the monetary theorists) credit expansion and contraction are dependent variables, governed by the mechanism of the turnover of capital.[19]


In similar fashion, the time factor (the durability of the means of production) constitutes the basis for the distinction between fixed and circulating capital. The means of labour employed in the production process only constitute fixed capital "to the extent that the period of their use exceeds that of the turnover period of circulating capital",[20] i.e. to the extent that the "turnover of the fixed portion of capital also therefore comprises the turnover time of a number of turnovers of the circulating portion of capital".[21]


This difference in the length of life of each type of capital produces a variation in the replacement of each type of the means of labour, to the extent that we do not look merely at the value aspect (as replacement of money), but at the same time at the process as replacement in kind. Whereas labour power and those means of production which represent fluid capital (raw materials) are used up in a short period of time, and must therefore be constantly renewed, the replacement of fixed capital in kind does not occur continuously, but rather periodically.[22] Marx uses this difference in the time periods necessary for the replacement of both types of capital in the form of money and in kind, as one of the elements ("the material basis") for his explanation of the periodicity of crises.[23]


As long as the process of reproduction, and the problem of equilibrium are regarded exclusively in terms of value, the problem under consideration here will simply not arise, as the distinction in the lifetime of fixed and fluid capital applies to their natural form, not their value. If one looks at Marx's scheme for simple reproduction purely from the point of view of value, and assumes an annual renewal of all the parts of capital, the resultant synchronisation of the movements in the scheme would obliterate the specific difference between fixed and circulating capital,[24] and hence and whole problematic connected with the varying replacement times. This is because in the scheme, both fixed as well as circulating capital, as values, are renewed annually. The problem first arises when one looks at the scheme from the aspect of use-value: at this point the difference in the life of each kind of capital becomes apparent, and hence too the problem of different dates for their replacement. (The originally assumed synchronisation of replacement dates was only a preliminary approximation, which does not correspond with reality). Whereas raw materials have to be renewed annually, fixed capital (for example the 2,000 units in Department II of the scheme (which manufactures consumer goods) "is not renewed during its whole time of functioning" because its life adds up to several years.[25] Consequently, there can be no sales from Department I, which manufactures fixed capital, to Department II, for several years. However, since the annual productive capacity of Department I remains at 2,000 units, overproduction must take place there. "There would be a crisis-a crisis of overproduction-in spite of reproduction on an unchanging scale".[26] So, "normal" production could only take place in Department I if (despite the assumption of simple reproduction in Department I) Department II was to be expanded over a number of years,[27] thus creating a new, additional market for Department I each year, (accelerator principle).[28] However, this is impossible, as the more rapid growth of Department II, on the basis of a given technology, presupposes an impossible increase in the working population. Department II would have to be doubled in the second year, and increased three-fold in the third; the growth in the working population employed there would therefore have to go up by 100% in the second year of reproduction, 50% in the third, and 35% in the fourth!


In addition to the reasons for the absence of an equilibrium which we have already mentioned, there exists a much more fundamental and general one, which is a product of the structure of the capitalist mode of production and the tensions which are founded in the dual character of this mode of production.


Both pre- and post-Marxist theory confine the conditions for "equilibrium" to sub-markets,[29] and then express them solely in terms of value. The relation between quantities and values is only analysed from the perspective of how variations in quantity affect marginal values. An "equilibrium" can always be obtained given such assumptions.[30] In contrast to this Marx showed that the issue is not that of equilibria in sub-markets (money-market, labour-market, commodity market for the means of production or consumption), or equilibrium in the "production process" or the "circulation process". Rather, because Marx understood the capitalist process of production as a "process-in-circuit" of capital through all its various stages, he stressed the idea that equilibrium has to be seen and understood as an equilibrium within the overall framework of all these stages. Starting from this perspective, he first carefully defined the state of equilibrium for the "process as a whole", and analysed the conditions which allowed it to arise; but at the same time he showed that these conditions cannot be realised within the capitalist mode of production. This signifies however, that in Marx the "normal course" of the "state of equilibrium" does not mean an "average", "typical" or "most frequently occurring" process, but rather an imaginary, undisturbed course of reproduction (under fictitious conditions), which never comes about in reality and merely services as a methodological tool of analysis. As a total social process the problem of reproduction has to be dealt with in its dual character: that is, "this process of reproduction must be studied from the point of view of the replacement of the value as well as the substance of the individual component parts of C'.[31] Consequently, equilibrium would only be realisable when both sets of conditions -those relating to value, and those relating to use are simultaneously fulfilled.


A comparison of these two sets -"the component parts of the value of the social product with its material constituents"[32] -yields Marx's specific formulation of crisis, and its solution. In the circuit C...C' "the conditions of social reproduction are discernible precisely from the fact that it must be shown what becomes of every portion of value of this total product, C'".[33] This means that not only must all the commodities produced be sold on the market, without a remainder, in terms of value, but what subsequently happens with the use-values, the material mass of things, which has been purchased must also be investigated: to see whether they can in fact be completely used up in the production process (equilibrium in production),[34] including individual consumption. The question is therefore one of the "reconversion of one portion of the value of the product into capital and the passing of another into individual consumption;... and this movement is not only a replacement of value, but also a replacement in material and is therefore as much bound up with the relative proportions of the value-components of the total social product as with their use-value, their material shape".[35]


What has been said is already sufficient to show that the position often asserted in economic literature to the effect that Marx held use-values to lie "outside the sphere of investigation of political economy" is based on a misunderstanding. Marx states in fact that "use-value as use-value" is outside the scope of political economy, i.e. use-value as subjective utility.[36] He counterposes to this use-value "as material shape", which is not a subjective utility, but an objective thing with a definite, economically significant form,[37] with a natural form, which is either exchanged on the market or functions in the labour-process as a means of production. Consequently Marx speaks of "use-value or object of use", of use-value or "material form", of use-values "and the physical body of the commodity", of the "sensuous objectivity of the bodily form of the commodity", and of the "quantity of the means of production" -as distinct from values themselves.[38] Use-values defined in this way are of crucial importance in Marx's system.[39]


The influence of the dominant theory has meant that Marxist literature has also dealt with the problem of equilibrium -insofar as its conditions are specified in Marx's "Tableau Economique" -exclusively in terms of value. (Kautsky, Hilferding, Bauer, Luxemburg and Bukharin). There have to be certain quantitative proportions of value in each of the Departments of Marx's schemes of reproduction if all the amounts of value supplied and demanded are to be exchanged without a remainder. The analysis of the material aspect, of the labour-process, was reduced to the single thesis that in the process of reproduction Department I must produce means of production, and Department II means of consumption.


However, Marx's conception is fundamentally different from the above. He shows that definite technical proportions must exist between the mass of labour and the mass of the means of production (machines, raw materials, buildings), in all the Departments and Sub-Departments of the schemes of reproduction, in addition to the value proportions; this depending on the particular character of the sphere of production under consideration. In control of the technical labour-process, the amount of value represented in the use-values is quite immaterial.[40] The technical proportionality of the factors of production is arranged directly in the factory by the technical management. However, as far as the mutual relation of the various branches of production within society is concerned, this proportionality is the basic condition for the undisturbed course of the production process, as the social division of labour makes the various preceding and subsequent stages of the labour process vertically dependent on one another, as "limbs of the total labour". Despite any apparent personal independence, the producers soon discover that "the independence of the individuals from each other has as its counterpart and supplement a system of all-round material dependence".[41] The full employment of all productive factors in the technical labour-process, with neither unused capacity nor shortages of raw materials, machines or labour, is only possible given such a technical articulation and complementary quantitative harmonisation of the various branches of industry.


In short, the condition for the equilibrium of the system of capitalist production as a whole involves a dual proportioning of its basic elements. Whereas all that is required for the complete disposal (of the product) on the market is a value proportion within the realm of each individual branch of production, the technical labour-process requires a quantitative proportioning both between branches of production and of the factors of production within each branch, which is determined by the state of technology. These technical proportions are no more given from the outset in the capitalist mode of production than the value proportions, since the "quantitative articulation of society's productive organism is haphazard and spontaneous".[42] But is there any chance at all of this dual proportioning being realised? This question is at the heart of Marx's understanding of the problem of equilibrium in the "process as a whole', which is the unity of the technical labour-process and the value-based process of circulation. Where this approach differs from the dominant view can be seen most clearly in the example of simple reproduction.


"The assumption is that a social capital of a given magnitude produces the same quantity of commodity-value this year as last, and supplies the same quantum of wants" (i.e. supplies the same mass of use-values). Does an equilibrium in reproduction exist in the case of, for example, a bad harvest reducing the amount of cotton by a half, although it represents the same value as twice as much cotton did previously? In short, "if the value remains the same although the mass of use-values may decrease"?[43] Seen in terms of value there would still be "an equilibrium of exchange" in the scheme for simple reproduction; in contrast to this, the scheme would necessarily exhibit large disturbances when looked at from the standpoint of the technical labour-process: half of the spindles and looms would have to be shut down because of a shortage of cotton, i.e. the technical scale would be halved. Reproduction cannot proceed on the same scale.[44] This example shows what is unsatisfactory about purely looking at value, as the dominant theory does. The latter assumes that the conditions for equilibrium which are expressed in the value equations can always be realised. Although they know that capitals which are immobilised within a branch of industry can only be shifted with difficulty to other branches, they nevertheless treat such instances as "frictions" which merely impede the realisation of value-equilibrium for short periods. In contrast, the theory regards "adjustment" for longer periods as eminently possible, as the question here is not so much that of the transfer of already immobilised old capitals, as of the investment of new capital; i.e. "processes of adjustment" within production, which allow the subsequent reestablishment of the correct value proportions on both sides of the exchange equations. Against this, Marx shows that the value-equilibrium, which is asserted by all static theories, and which the economy is supposed to tend towards, can only be established by chance or exception. This is because the technical labour-process gives rise to resistances and blockages of an objective and enduring kind which, in principle, exclude the establishment of such an equilibrium. Even if, when seen from a purely physical point of view, complete freedom and free mobility of capital were to exist, and the requisite transfers needed for the establishment of equilibrium as set out in the value equations were to take place, the equilibrium of the system as a whole would not be attainable, due to the incongruence, in principle, of the value proportions and technical, quantitative proportions. It may well be possible for a temporary, particular, equilibrium to occur, e.g. a value equilibrium on the market (for products); but it would then turn out that an equilibrium in production did not exist, and that the various elements of production cannot find a use or, conversely, that although an equilibrium in production might exist, there would be no equilibrium of value on the market. What follows from this is that given a particular quantitative technical proportion, which is the necessary product of the scale of production and depends on the size of fixed capital,[45] there is a value proportion which is the result of this technical proportion; it cannot be changed according to the free will of the capitalist in order to fulfil the theoretically postulated conditions for value-equilibrium. In short, the value proportion is less elastic because it is bound up with the technical proportion. Given these circumstances, the incongruence of both sets of proportions, and hence the tendency towards the disequilibrium of the system as a whole is unavoidable. On the basis of capitalist production, equilibrium -the "normal course" -is simply our own abstraction, a conceptual fiction, a derivation of a "true understanding", which is the opposite of our abstraction, namely constant disequilibrium. "In political economy law is determined by its opposite: the absence of laws. The real law of political economy is chance."[46]


Marx does not only deny the regulatory function of the price mechanism, which brings about a tendency for supply and demand to balance out, but also shows that once this mechanism has got into a state of disequilibrium,[47] it continually produces forces which magnify it. Because of the fact that too much has been produced, there is a drive to produce still more! Ever since Adam Smith, the dominant school has only been able to propound the theory of the adjustment of the volume of production to demand by using competition, because they presupposed competition as something given, as a kind of "occult quality", without analysing its origins. Competition takes on the role of explaining the entire lack of concepts of the economists, whereas, conversely, the economists should have explained competition.[48]


In contrast to the dominant view, Marx showed that no mechanism of equalisation exists, in the sense of an adjustment of production to demand. For Marx an orientation to consumption, i.e. adjustment of production to demand, was a characteristic of capitalism's youth, the period before the arrival of modern large-scale industry, when there was as yet no large fixed capital.[49] There can be no talk of such an "adjustment" of production to demand in the present-day, where fixed capital constitutes a predominant, and growing, share of total capital: the industrialist ignores the "command of the market" to curtail production, which is supposedly expressed in falling prices. In fact, the characteristic of the highly developed capitalist economy is that it is directed towards production rather than consumption, i.e. production precedes demand, which results in an inherent tendency, for reasons dealt with previously, to the periodic over-production of durable "fixed" capital, for which no profitable use can be found.[50] But because there is a tendency to overproduction in the sphere producing fixed capital, a form of competition necessarily arises which does not operate to equalise supply and demand. Where overproduction means there is no living-space (market) for all firms, the individual firm finds it necessary to save itself from collapse at the expense of all the others. Far from curtailing output when prices and profits are falling, every firm with access to the necessary means seeks to produce more cheaply than its competitors, and at a profit, by introducing improved and cheaper techniques and by an expansion in the scale of production. Hence, the constant overproduction of fixed capital constitutes a permanent force for the continuous revolutionising of the techniques of production, and through this for constant revolutions in value, which are a characteristic feature of the capitalist mode of production.[51] And although the constant improvements in techniques and the expansion of the scale of production aggravate the general overproduction, the individual capitalist has, nevertheless, secured the profitability and markets for his own progressive plant.[52]


Thus, the pressure of the initial overproduction serves to propagate the transformation of the entire structure of the capitalist mechanism over the whole breadth of society: at one pole, the victory of the new, higher, technology and, at the same time, the enlarged scale of the individual plant; the extra profits which are thus attained attract new entrants, the movement becomes more generalised and an "upswing" occurs. But this does not prevent that at the other pole of society, an increased threat is simultaneously posed to all those plants with backward techniques, because of falling prices and overproduction, along with pressure to withdraw altogether from competition, precisely as a result of the spreading of improved techniques and associated revolutions of value (reduction in "socially necessary labour time"). However, since the scale of those few new large plants exceeds the productive capacity of the many small plants which fail, the end result of this movement is a growth in the overall scale of production in society. This movement takes place repeatedly, as the new plants with the most modern techniques soon lose their privileged position because of the generalised application of technical innovations, which means the whole game must continuously restart.


Under the pressure of periodically occurring overproduction, the drive towards the constant revolutionising of techniques, and hence "periodic revolutions in value" is strengthened. The capitalist who yesterday was able to make a surplus profit by the introduction of new processes, is today threatened by newcomers with even better techniques, and has to be content with the average level of profit: tomorrow he may not even cover his costs or may even register a loss, and will have to pull out of the market.[53] It is a permanent hunt for extra profit, a continual attempt to secure a privileged island, if only temporary, of surplus profit for the individual capitalist's own plant by the revolutionising of techniques. The "real movement" which we have described shows that one cannot speak of an "adjustment" of production to demand; rather, production constantly races ahead of demand, and the "regulative" function of the price mechanism does not in fact operate. Far from leading to cutbacks in production, periods of falling prices were in the past, and still are today, periods of exceptional technical progress and expansion in production. In the face of this now evident failure in the construction of the prevailing economic mechanism, even the ruling theory begins to discover that instead of the alleged tendency towards equilibrium, there exists a 'perpetuum mobile' of change, a tendency towards disequilibrium;[54] that instead of the regulatory function of the price mechanism, equalising supply and demand, situations can arise where "once destroyed, equilibrium is lost forever".[55]


A theory of dynamic movement must not only point out individual dynamic "factors", but also illuminate the disequilibrating movement of the system as a whole, and its causes; and beyond that has to show the consequences of the dynamic movement for the system as a whole. In one self-contained theory Marx tried to capture not only the course of the economic cycle, but also the structural changes in the overall system which were its product. Only by doing this could he show the direction the system was taking as a whole, its "developmental tendencies". This is not contradicted by the fact that at a particular level of development the direction of the process, which has been described, encounters a barrier, and is brought to a close. The validity of the theory is not put in question if it is shown that this barrier to the capitalist dynamic is caused by and derived from the basic conditions of the system -the "dual character of labour".[56]


We have seen how the development of the capitalist mode of production is accompanied by a tendency towards the growth in the minimum size of plants and hence also a growth in the capitals which are required to run a business under "normal" conditions.[57] It follows from this that, at a given scale of production, the size of plant does not depend on the free will of the businessman. "The actual degree of development of the productive forces compels him to produce on such and such a scale."[58] This is therefore something which is technically given. It is evident that this makes the consonance between the technical proportions and the requisite value proportions all the harder to achieve. In the course of capitalist development the tendency towards the growth in the organic composition of capital makes itself felt. A continually larger portion of a given capital is transformed into means of production (MP), and an ever smaller portion into labour-power (LP).[59] Looked at from the aspect of value, the relation c:v does indeed grow; nevertheless, because of technical progress (cheapening, in value terms, of the means of production) this relation grows more slowly than the quantitative increase of the relation MP to LP. It is clear that the difference between the value and the quantitative rates of growth of capital renders the congruence of the value and the physical proportions all the more difficult.


In addition, the analysis of the technical labour-process yields the law of the uneven development of the individual branches of production.[60] In fact, the example of the disproportionality in development best serves to illustrate the distinction between Marx's view and that of the dominant theory. The latter conceives of uneven development in the form of capital accumulation in different branches of industry having different values, e.g. 20% in one, 35% in another etc., from which the value disproportions give rise to disturbances. According to Marx this can happen, but does not have to; and it does not get to the real essence of the problem. Even if accumulation were to have taken place evenly, in value terms, in all spheres, e.g. by 1%, disturbances must necessarily arise if the expansion in terms of material is not the same in all branches of production; this is because with the same percentage growth in capital (e.g. 1%) in all branches, the material expansion in the various branches can vary in size, and can amount, for example, to 5% in one sphere and 20% in another. This is determined by the specific technical characteristics of each sphere, and in Marx's view, it is these characteristics which underlie the strides in technical development.[61]


Related to the above law, but not identical with it, is the contradiction between an -abstractly -possible, steady accumulation of value, and the actual fact of a discontinuous, uneven material expansion. Vulgar Marxist literature is very fond of looking at accumulation in purely value terms and assuming that any desired amount of value can be accumulated (see, for. example, Laurat); that 50% of the surplus-value is consumed by the capitalist, and the other 50% steadily accumulated each year. Whether the half of the surplus-value which has been accumulated is sufficiently large to purchase the amounts of means of production required for the expansion of production was not asked. Behind this view lies the assumption that any small increase in profit can correspond to an equally small growth in the technical apparatus of production -i.e. the assumption of the infinite divisibility of goods. In contrast to this, Marx stresses that such a parallel relation between value accumulation and material accumulation does not exist because not every dollar earned can be accumulated, i.e. converted into the material elements of production. In order to expand the scale of production a certain minimum amount of capital is usually required which represents a whole set of technically linked machines, making up a unity (e.g. in the textile industry).[62] Expansion can only take place, therefore, with this unity, or multiples of it.[63] Such material relations-and hence also the value relations which they imply -consequently determine the minimum size of the money capital required for expansion, and vary from industry to industry.[64] In short, in Marx's view, "the proportions which the expansion of the productive process may assume are not arbitrary, but prescribed by technology". For example, whereas the entire surplus-value (or part of it) may be sufficient for the expansion of production in one branch, and will be thus employed, in another the surplus-value may have to be saved up for several years until it reaches the minimum size needed for "real accumulation".[65] Consequently, whereas one branch of production may be able to grow every year, expansion in others can only take place at intervals of several years.


The incongruence of the value aspect and the material aspect of the process of reproduction which we have looked at from the side of production is increased still more by forces coming from the demand side. A uniform proportional expansion of all the spheres of production rests on the hidden assumption that demand (consumption) can also be expanded in an even and proportional manner. In opposition to this Marx emphasises that the individual productive use of certain commodities is tied and inelastic, which must likewise result in an uneven material expansion of production in the various spheres. No one who finds two tractors sufficient for the cultivation of their land will buy four simply because their price has fallen by a half, as the demand for tractors -all things being equal -is not a function of their price, but of the acreage of land, i.e. it is determined quantitatively. "However, use-value -competition -depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can now get them for the same price that I previously paid for one".[66]


All these moments serve to make a uniformity of motion of the technical and value aspects impossible to achieve, and to hinder the dual proportioning of the development of the productive apparatus, in both value and quantitative terms, which is postulated by economic theory as the condition for "equilibrium". This equilibrium is incapable of realisation as a permanent "rule". With the constant impulses to the revolutionising of techniques and values, the coordination of the value and material aspects of the productive apparatus must become continually more difficult, and their incongruence continually grow. Each of the aspects of the productive apparatus moves in opposite directions in the wake of technical change and the development of the productive forces: the values of individual commodities have a tendency to fall, whilst the mass of the material goods increases. Under such circumstances equilibrium, the "rule" which is presupposed by political economy, can, as it were, only occur by chance within the general irregularity, as a momentary transitory point in the midst of constant disequilibrium.[67]

[1]Cf. Marx, Capital, II, p.157-8.

[2]ibid. p.108.

[3]ibid. p.124.

[4]ibid. p.108-8.

[5]ibid. p.50, Cf. p.106.

[6]ibid. p.106.

[7]ibid. p.107 .

[8]"Further: since the circulation process of capital is not completed in one day but extends over a fairly long period until the capital returns to its original form, since this period coincides with the period within which market-prices equalise with cost-prices, and great upheavals and changes take place in the market in the course of this period, since great changes take place in the productivity of labour and therefore also in the real value of commodities, it is quite clear that between the starting point, the prerequisite capital, and the time of its return at the end of one of these periods, great catastrophes must occur and elements of crisis must have gathered and developed, and these cannot in any way be dismissed by the pitiful proposition that products exchange for products' (Theories of Surplus Value, Part II p.495) .

[9]"In order that the circuit may be completed normally . . . C-M-C (must take place) not merely (as) replacement of one commodity by another, but . . . with value relations remaining the same. We assume that this takes place here . . . that the commodities do not undergo any change of value during the circular movement. Otherwise this process cannot run normally." (Capital II p.74-5).

[10]ibid. p.158-9.

[11]ibid. p.186.

[12]ibid. p.243.

[13]ibid. p.252, 255.

[14]ibid. p.270-4.

[15]ibid. p.266.

[16]ibid. p.277, 281 .

[17]ibid. p.112.

[18]ibid, p.282-3.

[19]Curiously, a misjudgement of the importance of Marx's analysis for the under standing of the dynamic course of the capitalist economy can be found even in Engels, who advocated the view that Marx had "attached unwarranted importance to a circumstance . . . of little significance", namely what Marx called the "release" of money-capital and "what are the uncertain results of his painstaking calculations" (See Engels's note on p.288 of Capital, Vol. II).

[20]ibid, p.282 .

[21]ibid. p.171 .

[22]ibid. p.462 .

[23]ibid. p.189.

[24]In the scheme of simple reproduction "total value 6,000, exclusive of the fixed capital persisting in its natural form, according to our assumption" (Capital II p.401).

[25]ibid. p.507.

[26]ibid. p.472.

[27] "If things are to proceed normally, accumulation in II must take place more rapidly than in I" (ibid. p.516).

[28]As can be seen Marx's accelerator principle is the direct opposite of that normally expounded in the literature of the dominant theory.

[29]"By its essence, statics only studies one single market" (R. Streller, op. cit. p.39).

[30]"Equilibrium must be considered as an equilibrium of prices." "There is always a solution of such a system admitting full employment of every factor of production", given only that the condition "that prices must be high enough to equalise supply and demand" is kept to (G . Cassel, "Keynes" 'General Theory" in International Labour Review, October1937, p.438, 444).

[31]Capital, II p.497.

[32]ibid. p.434.

[33]ibid. p.397.

[34]In Capital Volume III Marx consequently speaks of the "social equilibrium of production". Since the immediate consumption of all factors of production is assumed, the existence of reserves lying unused in warehouses is disregarded.

[35]Capital II p.398.

[36]Contribution to the Critique of Political Economy, p.28.

[37]Theories of Surplus Value, 11, p.507-8.

[38]Capital I p.143, 159, 164-5: 11 p.398: III p.46.

[39]One can only abstract from use-value when the matter at hand is that of the process of valorisation, the formation of surplus-value: "In considering surplus-value as such, the original form of the product, hence of the surplus-product, is of no consequence. It becomes important when considering the actual process of reproduction . . . Here is another example of how use-value as such acquires economic significance (Theories of Surplus Value, III p.2512).

[40]ibid. "All these things serve in the real labour process because of the relationship which exists between. them as use-values, not as exchange-values, and still less as capital."

[41]Capital I p.168, 203. Marx therefore speaks of the "interdependent branches of the collective production of a whole society", and of the "bond" which holds it together. Not only are the branches of cattle-breeding, tanning and shoemaking quantitatively dependent on one another, but also those branches which supply the means of production (Capital I p.472, 474). What results from this, and what is important for understanding the dynamics of capitalism, is that revolutions in the mode of production in one individual sphere, e.g. machine-spinning, will necessitate similar revolutions in other spheres, such as weaving and dyeing, or else incongruities could arise in the technical proportions between these branches of industry (ibid . p.505) .

[42]ibid. p.202.

[43]Capital II p.399.


[45]Capital II p.174.

[46]Marx, Aus den Exzerptheften Op. cit. Section I, Vol.3, pp.530-1.

[47]"In reality, supply and demand never coincide, or, if they do, it is by mere accident, hence scientifically = 0, and to be regarded as not having occurred." (Capital III p.189).

[48]ibid. p.208, 225.

[49]Cf. Poverty of Philosophy, p.68. On the absence of expansionary phases, cyclical booms with subsequent collapses in early capitalism, see W. Sombart Der Moderne Kapitalismus, Leipzig, 1921, Bd.ll p.214ff.

[50]Poverty of Philosophy, p.68. "What Ricardo cannot answer, and neither Mr Say for that matter, is where competition, and the resultant bankruptcies, trade crises etc. come from, if every capital finds its proper employ?" "If capitals were not so numerous in relation to the uses of capital, competition would be inexplicable." (Marx, Aus den Exzerptheften zu Ricardo op. cit. Section I, Vol.III, p.510-1). The only one of the recent writers to have seen this problem is Willard L. Thorp, who writes: "Under competition it is certain that some degree of overcapacity will exist"(W.L. Thorp, "The Problem of Overcapacity" in Economic Essays in Honour of W.C. Mitchell,1935, p.491).

[51] Capital II p.108.

[52]Cf. Capital III p.186-189, 256-7.

[53]Cf. Capital II p.108.

[54]Cf. P. W. Rosenstein-Rodan, op. cit. p.131 .

[55]Umberto Ricci, op. cit.

[56]As a condition of the future higher form of society, Marx did not only consider the objective factor, the economy, but also the subjective factor, humanity itself. World history, "is nothing but the creation of humankind through human labour, nothing but the emergence of a nature for humanity" (Economic and Philosophical Manuscripts, p.145). The "conquering" of the world of objects, is at the same time, the first emergence of this world for humanity. In Marx, its mastery, its "possession" does not only occur through theoretical observation, but rather through labour, through human praxis; this view serves to distinguish Marx from Feuerbach, for example (Cf . Marcuse, "Neue Quellen zur Grundlegung des historischen Materialismus" in Die Gesellschaft, Berlin, 1932 No.8 p.152 [Studies in Critical Philosophy, NLB, 1972.]). However, the labour, whose result is the subjection of nature and the becoming of humanity, is not "value creating" labour, but "real", i.e. "concrete"-labour which creates articles of use; in short, the development of human productive power. But since concrete labour is always bound together with value-creating labour in the present economic order, the degree of the progressing maturity of concrete labour can only be expressed in its value, in the fall of the rate of profit, which is the capitalist expression of the wealth of society, the degree of the productive power of labour, and hence also a symptom of the approaching annulment of the rule of capital itself. "The decrease in the interest rate is therefore a symptom of the annulment of capital inasmuch as it is a symptom of the rule of capital in the process of perfecting itself -of the estrangement in this process of becoming fully developed and therefore of hastening to its annulment" (Economic and Philosophical Manuscripts, p.158). Having shown elsewhere (Das Akkumulationsgesetz) the consequences which arise for the problem of equilibrium with the value-observation of the process of accumulation, I confine myself here to emphasising those moments which hinder the attainment of a state of equilibrium from the material side of the technical labour process, and increase the incongruence between the material and value-proportions.

[57]Capital I p.773-4.

[58]Poverty of Philosophy p.41. The significance of this observation first becomes clear if we compare it with Bohm-Bawerk's view, according to which the scale of production can be determined arbitrarily, and is not technically given. In Bohm's view "any desired large or small amount of capital goods is sufficient to buy and pay the total supply of wage-labour in the economy. One simply needs to extend or compress the period of production accordingly." (Kapital und Kapitalzins). One is simply left wondering why unemployment continues to exist, when it appears to be so easy to abolish.

[59]Capital I p.774.

[60]"The specific development of the social productivity of labour in each particular sphere of production varies in degree . . ." (Capital III p.163).

[61]"If all . . . capitals have accumulated at the same rate it does not follow at all that their production has increased at the same rate . . . The same value is produced in both cases, but the quantity of commodities in which it is represented is very different. It is quite incomprehensible, therefore, why industry A, because the value of its output has increased by 1% while the mass of its products has grown by 20%, must find a market in B where the value has likewise increased by 1%, but the quantity of its output only by 5%. Here, the author has failed to take into consideration the difference between use-value and exchange-value" (Theories of Surplus Value I11, p.118-119).

[62]Cf. Capital II p.80.

[63]Capital I p.465-6.

[64]Capital II p.80.

[65]Capital II p.492-3.

[66]Theories of Surplus Value III p.119. The fact of the inelastic demand-along with the role of money -constitutes the main argument of Marx's critique of Mill's and Say's theory of the identity of supply and demand, which denies the possibility of generalised crisis.

[67]". . . a mode of production whose laws can only assert themselves as blindly operating averages between constant irregularities' (Capital I p.169)