Capital's inherent contradictions

I think it’s fair to say since the 1970s debates on explanations for capital’s historic crisis have been pretty much polarised been supporters of the ‘saturation of markets’ versus the falling rate of profit (FRoP) or Luxemburg v Grossman/Mattick.

Through discussions, especially with Link, I’ve recently come to accept that Luxemburg’s theory of capital’s need for non-capitalist buyers is wrong because it is incompatible with Marx’s analysis of capital’s contradictions, and looking back at your lengthy critique of Luxemburg written in 1976 (!) I can see that many of your criticisms were perfectly correct. But, apart from her lasting contribution as a revolutionary, I do still believe she was trying to address a real problem identified by Marx.

Looking at Chapter 15 in Capital Vol 3, which as you well know is on the workings of the FRoP, Marx also talks about the problem for capital of realising the surplus value produced - the famous ‘second act’ of the capitalist production process. Briefly, the fundamental problem for capital is that its only motive and purpose is its own self-expansion, the production of an ever-expanding mass of surplus value; but for accumulation to take place the mass of commodities produced must be sold and the largest possible portion of profit reconverted into capital, and here capital faces barriers due to its own relations of production, which restrict society’s capacity to consume while at the same time generating an ever-growing mass of commodities…

For Marx, capital can only attempt to resolve the inherent contradiction between the conditions for the production of surplus value and its realisation by continually extending the market. However, the growth of productivity continually threatens to outstrip the capacity of the available market, re-creating the same problem in conditions of expanded production; the more capital develops, the more it comes into conflict with its inherent limits on consumption. In other words, periodically, and at a higher and higher level, “Too many commodities are produced to permit of a realisation and conversion into new capital of the value and surplus-value contained in them under the conditions of distribution and consumption peculiar to capitalist production.” (Ch 15).

If this is right I can only conclude that the circulation or consumption of commodities, far from being a secondary question as is sometimes argued by supporters of the FRoP, is not only integral to the ability of capital to accumulate, but also the source of inherent contradictions as a result of the capital-wage labour relationship itself: the more capital develops, driven by the falling rate of profit, the more it comes into conflict with the inherent limits on society’s capacity to consume. And the inescapable problem for capital appears to be that if there are no set limits to the expansion of the internal market, there are definite geographic limits to the expansion of the external market.

Of course whether the problem of realisation or the falling rate of profit is the key factor in explaining the entry of capital into its historic crisis – or whether as is more likely it is an interplay of these and other factors – will probably still be being debated well after capitalism’s revolutionary overthrow… But, to avoid false arguments, is it possible to agree that capital’s problem of realisation, and therefore of finding markets for its ever-growing mass of commodities, is an inherent contradiction of the mode of production and at least potentially a decisive factor?

I would be very interested in comrades’ views.

MH

My critique of Luxemburg, plus a contribution from Link, can be found here

Forum: 

Marky - Just spotted this. Cannot open the link to you and Link which it would be good to read before replying.

Yes I seem to have problems getting links to work; here'a another go:

Mine: markhayes9.wixsite.com Link's:

markhayes9.wixsite.com

...

Also your 1976 text for reference: leftcom.org

Thanks for your comment and sorry not to reply earlier. The links in your second post worked but then the links from your blog back to our articles didn't. We actually addressed this directly in one of our replies to C McL (who was then charged with taking up the cudgels with us by the ICC - we see today he now denies that capitalism is decadent).

"Market gluts and over-production are an obvious feature or, as Marx says in Theories of Surplus Value Volume II, “phenomenon” of capitalist society, and set it apart from all other previous societies. In Capital, Marx sought to explain how this society capable of creating vast quantities of cheap commodities was suddenly thrown back on itself, and despite the self-evident poverty all around, was, in certain crisis conditions, incapable of maintaining, let alone extending, its market. We believe he found these in his analysis of the operation of the law of value, and it is this which determines the cycle of expansion and contraction of both the market and the forces of production. This is totally different from the wretched Say (and other capitalist apologists like McCullough, the editor of Adam Smith’s works) who tried to deny that there were crises and that there was overproduction under capitalism. The question is not whether these take place (as they self-evidently do, we can move on from red herrings like James Mill, McCullough and Say, etc.), but to explain how they come about." This is in our article from 2007 on The Dynamic of Capitalism. The law of the tendency of the rate of profit to fall is not just an explanation of periodic crises but also explains the drive of capitalism and its tendency to constant expansion. As Marx wrote in Chapter 15 "On the other hand, the rate of self-expansion of the total capital, or the rate of profit, being the goad of capitalist production (just as self-expansion of capital is its only purpose), its fall checks the formation of new independent capitals and thus appears as a threat to the development of the capitalist production process. It breeds over-production, speculation, crises, and surplus-capital alongside surplus-population." The question is why is capitalism capable of expanding the market at one point only for it to be thrown back into crisis in another. What is the mechanism which produces both these conditions? It has to lie in the way the law of value operates. Marx seems clear that it is the fall in the rate of profit which determines the process of both expansion and contraction and after a lengthy analysis in which he shows that the mass of capital can keep on growing whilst the rate of profit is falling until at a certain point a collision occurs because "The real barrier of capitalist production is capital itself." Even when Marx says that in the last resort the cause of all real crisis is the poverty and restricted consumption of the masses he goes on in the next page to say this is not because too many commodities are produced to satisfy human wants but indeed people are living at a low level - its just that capitalism won't provide for them at a cost which they can afford (as capitalism is driving down their wages as the rate of profit falls). In short it is the "antagonistic social relations" which drive this overproduction but these rest firmly on the question of producing valorisable capital. I don't really get your distinction between external and internal for our time since the geographic limits to the external market have not changed in a hundred years i.e. the world is totally capitalist (or as near as makes no difference) so we come back to the same question - why is it that capital can expand at one time and then collapses into periodic crisis at another. This produces among other things "overproduction" but this is a phenomenon not the cause which is hidden from view and harder to grasp.

Thanks for the clarification of your position. I have read your response to CMcL but wanted to be clear what your current views are. I'll consider carefully what you have said and respond in due course...

MH

As MH says we have been having questioning everything and our discussions about the errors in Luxemburg’s theory of accumulation and moved on to issues of overproduction and rate of profit.

I find the argument is often presented that overproduction is about being purely market related and purely related to the working class’s ability to purchase. This seems to me to be quite clearly an insufficient argument, its impossible by definition and so of no help at all in understanding capital’s problems. Overproduction must relate to both production of constant capital as well as variable and as constant capital grows faster and larger and so it seems to me then that the focus of overproduction must be about the amount of constant capital in existence.

I think I remember you criticising Grossman but I cant remember why but having looked at some of his writing again I discovered he says much the same in that he focusses on over-accumulation as the problem for capital. This seems to make a lot of sense to me and over-accumulation of capital seems a close relation of FROP in that its the same thing or a product of the same process of accumulating capital. He says correctly I think that the a specific figure for the RoP is not what generates crises and sees an interaction between this and the mass of surplus value produced as being a factor in producing such crises. As you yourself paraphrased - A high rate of profit may generate a small mass of surplus value whereas a low rate of profit can generate a high mass of profit.

This does seem to describe well how capital has progressed over the periods of ascendancy and obsolesence and it does integrate the issues of production and circulation as MH is suggesting.

MH and I came to the same conclusion some time ago that neither decadence or obsolescence were based on economic criteria but rather on political/social/historical factors. So neither the actual rate of profit nor the proportion of pre cap markets could be a determining factor in the onset of crisis (I being kind there, pre cap markets have nothing to do with it anyway). This suggests that other factors must come into play to interact with TROPF to provoke outright crisis and as you add and ’... but these rest firmly on the question of producing valorisable capital’ relates it to circulation issues.

We would all agree that contradictions of capitalist relations of production are key. As C says: "The real barrier of capitalist production is capital itself’

And this is where I think C’s comments on causal and phenomenonal factors are useful way to approach things but im not sure you are saying this but that sounds to me like an interpretation would be that capital or capitals relations of production is the source and that the TROPF is peripheral alongside overproduction?

Anyway i suppose i am asking here for a wider explanation of cause and phenomenon?

I have a separate but related point to raise if you don’t mind. What role does waste production play in all this in the past century? It a burden on the wc generated by sv that in not capitalised yet it has increased enormously. Its not possible to quantify and does not impact on say rate of exploitation and rate of profit, yet it keeps an awful lots of wheels turning in social terms. In these terms it sounds like the market must absorb overproduction if capital is to stay healthy so I wonder what impact the capacity to absorb waste production can have. As a peripheral factor, how do you see it impacting on crises?

Link I am not really sure who your questions are directed towards. All I can say is that all arguments about the falling rate of profit, the organic composition of capital and the cycles of accumulation have to be understood in terms of the system as a whole. Thus you can find that waste production will keep the wheels turning for some capitalists (at best recycling the surplus value created elsewhere). Arms production is a classic example. Its product cannot re-enter the reproduction process either as Dept I or Dept II but it undeniably makes a profit for those companies and states who sell arms to other states. It is certainly not " a province of accumulation".

In response to Cleishbotham's first reply to me:

Yes, the ICC article by CMcL accused you of defending the same position as those bourgeois political economists like Say and Ricardo who saw the production and realisation of capital as identical and therefore denied the possibility of overproduction. But you clearly accept the existence of overproduction as a phenomenon; the question for you is how does this phenomenon come about?

You argue that it is Marx’s analysis of the law of value that determines the cycle of expansion and contraction of both the market and the forces of production. It is therefore the rate of profit that results in periodic crises and it is these periodic crises that produce the phenomenon of overproduction.

I would argue that for Marx there appears to be something more fundamental at work here than the periodic appearance of a glut of commodities on the market that the working class cannot afford to buy: a tendency of capital towards overproduction which is the result of inherent limits on capitalist society’s ability to consume; the workers, after all, must by definition produce more than they can themselves consume, otherwise there would be no profit, while the capitalists cannot simply consume the total mass of commodities themselves: “The consuming power is furthermore restricted by the tendency to accumulate, the greed for an expansion of capital and a production of surplus value on an enlarged scale. This is a law of capitalist production imposed by incessant revolutions in the methods of production themselves…” (Capital 3 Ch 15, my emphasis)

So the available market must always tend to be outstripped by the needs of accumulation. This is why "The real barrier of capitalist production is capital itself". The market must be continually extended; but this only results in the further growth of capitalist production so the problem of realising surplus value is simply recreated at a higher and higher level.

I don't really get your distinction between external and internal for our time since the geographic limits to the external market have not changed in a hundred years i.e. the world is totally capitalist (or as near as makes no difference) so we come back to the same question.”

That was actually my point; capital reached the geographical limits to the extension of the external market about a century ago, which logically must precipitate some kind of crisis of the system for the reasons described above. The history of the last 100 years surely demonstrates the result: chronic overproduction and increasing destruction of capital. For me this points to the problem of realisation as at least a potential cause of capital's historic crisis.

My intention in raising this was not to go over (very) old ground again but I do think the problem of realisation in the past has tended to be conflated with a defence of Luxemburg’s theory, which has had the effect of disguising the extent to which it is based on Marx’s analysis of capital’s contradictions, distinct (albeit intimately connected to) the falling rate of profit.

I have read this a few times but honestly I really do not understand the last paragraph.