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Henryk Grossman: The Accumulation of Capital and the Breakdown Theory - reviewed by Hillel Ticktin

This book is a documentary classic and Pluto are to be congratulated for its publication. The basic argument which Grossman puts forward is very simple. The rate of profit must fall and hence ultimately precipitate a capitalist breakdown. Most of the book is taken up refuting contrary viewpoints. Once the labour theory of value is accepted, a decline in the rate of profit must follow with a rise in the organic composition of capital, or the capital labour ratio in non-Marxist terms. It is obvious that if there is less surplus value per unit of capital then the rate of profit must fall. It is not quite so obvious that the organic composition of capital will always rise. Capital saving inventions imply the reverse, while trade unions can prevent the introduction of new technology and maintain the same number of workers in the plant. Raw materials may go down in price particularly under the impact of imperialism. Marx of course did discuss this issue under the heading of "cheapening of the elements of constant capital". He gave a number of "countervailing factors", which Grossman discusses and shows that Marx took from John Stuart Mill. There is a methodological problem with a discussion of a law and its countervailing tendencies.

Where do the latter spring from? Is there any reason to assume that there could not be an infinity of such countervailing tendencies? Why should they not prevail? It simply does not fit Marx's method. Indeed it seems that he did not even write it in that form. It was put together by Engels, who cannot be blamed for the future misinterpretations of British and continental empiricists. It is clear from the text of Capital Vol. 3 that Marx saw the introduction of new technique leading to both a rise in the organic composition of capital but also to greater levels of productivity, which implies a reduction in the cost of both capital goods and consumer goods. That seems to leave the issue indeterminate and at that level it is indeterminate. In the short to medium term there is no way that it can be assumed that the rate of profit will automatically fall. It has to be remembered that the rate of profit can rise with more investment, in the case of any one firm, both because of its technological superiority and because it is putting more capital into the national pool, instead of labour. It has to be remembered that profits relate to capital invested through a national redistribution mechanism. In any case modern economies are increasingly integrated into a world division of labour and it therefore becomes a question of the decline in the rate of profit over the global economy. Hence the rate of profit may fall globally while rising in particular countries and particular firms. Above all, a simple categorical assertion leaves out the class struggle. A decline in the rate of profit will lead the capitalist class to depress the wages and conditions of workers. While productivity is rising, this may not mean an actual decline in wages only a redistribution of value towards surplus value. In fact it is easy to go through the different elements of the equations and show that in the end the direction of movement of profits is dependent on the class struggle itself. The law can be regarded as a form in which capital is constantly renewing itself and the way it interacts with the working class. In the long run, there is no problem arguing that the law is correct. Marx had argued for the law in the Grundrisse in a more profound way. There he points out that the logic of the development of machinery is the total replacement of manpower by machinery. At that point no value is produced. In other words, to the extent that capital successfully reproduces itself it will negate itself through the removal of the source of value, labour. Put differently, it would appear that when machines make machines there will be no value and hence no profit. To the extent that manpower transfers to finance capital and government operated institutions like education, healthcare and subsidized industries it is not producing value. Hence it is possible to imagine a capitalist society in which there is some but not enormous unemployment, without the production of value. Such a society would clearly undergo a crisis. It is also clear that the law is really only a special case of the socialisation of labour and production. Marx says that the fundamental and even fatal contradiction of capitalist society lies in the increasing socialisation of production as opposed to the ever fewer number of magnates of capital. The socialisation of production is nothing other than the increasing integration of production consequent on the progress of the division of labour, which in turn reflects the increasing mechanisation of the economy.

Put differently the logic of the rising organic composition of capital is towards an economy in which there are ever fewer units of capital, staffed by ever fewer workers, with the consequence that the economy is increasingly organised by non-capitalists in the non-productive sector. Logically, the role of the capitalist becomes patently parasitic. Since he produces no value he can only obtain money by charging prices which do not reflect value. They then simply amount to a tax on the economy and so on workers. The theoretical problem is to marry the short/medium term argument with this long run argument. That cannot be done by simply discussing the internalities of the law. It must involve a more general theory of the nature of the transition from capitalism to socialism. That Grossman singularly fails to do. His book is useful both because of its historical importance and because he outlines the simple declining rate of profit argument. Nonetheless, because it simply relies on the movement of a category without embedding it in the class struggle and so the whole nature of the society, it leaves a dogmatic imprint which can only miseducate generations of socialists. The falling rate of profit argument is not a theory but simply one element of a theory. The failure to understand that simple proposition has led some socialists into a superempiricist method in the guise of a fundamentalist theory. Their method becomes superempirical because their so-called theory cannot be applied to most situations, which then forces them in the absence of any theory at all, into an empiricist position. by Hillel Ticktin (from 'Critique' no.26)