Debate on Luxemburg: "Impossibility" of accumulation or overproduction?
Updated: Oct 26, 2020
This text is the product of, and a contribution to, a debate on Rosa Luxemburg's theory of accumulation which began on the ICC's discussion forum.
It suggests that Rosa Luxemburg’s theory of capitalist accumulation is based on an incorrect interpretation of Marx’s analysis of capital’s inherent tendency towards overproduction and that her central thesis that capital needs non-capitalist buyers in order to accumulate must therefore be rejected. It also argues that her historical analysis of capital’s dependence on its non-capitalist surroundings for its development is based on this incorrect interpretation but remains a vital contribution to explaining capitalist decadence.
There are two different aspects or dimensions to Luxemburg’s theory as set out in The Accumulation of Capital (1913):
1. a theoretical aspect: capital needs non-capitalist buyers in order to accumulate;
2. a historical aspect: the accumulation of capital depends on non-capitalist social strata and forms of social organisation.
The first is intended as a solution to a perceived problem posed by Marx’s diagram of capitalist reproduction in Volume 2 of Capital. The second, which assumes the first, is based on an investigation of the historical conditions of accumulation.
She herself is quite explicit about these different aspects (see Chapter 26) and arguably at least some of the disagreements about her theory in debates within the Communist Left over the past 40 years have been due to a failure to distinguish between the two.
Capital’s problem of realising surplus value
Luxemburg’s starting point is the problem of how capital as a whole reproduces itself which leads her to the problem for capital of realising surplus value.
The only goal and incentive of capital is the appropriation of an expanding quantity of surplus value. Under the goad of competition every capitalist is driven to produce an ever-growing mass of commodities but in order to realise the surplus value produced this must be sold and converted into money; only when this has been achieved can expanded production take place.
But here capital confronts the inherent contradiction between its tendency towards the unlimited development of the productive forces and the limited capacity of society to consume. Luxemburg poses the question: where does capital find the consumers for this ever-growing mass of commodities?
Due to the conditions of capitalist production the workers can never consume the full value of what they produce; nor can the capitalists simply consume the surplus value produced if accumulation is to continue; a portion is required to expand production.
Surely if the capitalists themselves purchase the portion of surplus value needed to expand production surely, this can only throw an even bigger amount of commodities on to the market the following year?
Luxemburg argues that the diagram of capitalist reproduction produced by Marx in Volume 2 of Capital cannot provide an answer to this question because it is a purely abstract presentation which deliberately assumes a society composed only of capitalists and workers, in which the production and realisation of surplus value are therefore identical.
For Luxemburg this results in what appears to be the absurdity of capital producing more merely for the sake of it. She therefore concludes that there must be another group of consumers for this portion of surplus value; a group outside of the main classes in capitalism but still with a need to purchase capitalist commodities; a group with a means to purchase them that is not derived from the capitalists but from exchanging the goods it has produced.
In fact, what Luxemburg describes as an absurdity – an ever-bigger amount of commodities being thrown onto the market in each successive year in pursuit of consumers – appears to be the phenomenon of overproduction identified by Marx in Volume 3 of Capital which she herself cites in support of her thesis.
For Marx, the production of surplus value is only the ‘first act’ of the capitalist production process: in the second act, the total mass of commodities produced - which, driven by the tendency for the rate of profit to fall, swells to “immense proportions” - must be sold.
But while the first is limited only by the size of the working population and the intensity of exploitation, this second is restricted not only by capital’s drive to continually expand the mass of surplus value produced but also by society’s power to consume it based on “antagonistic conditions of distribution, which reduces the consumption of the bulk of society to a minimum varying within more or less narrow limits”:
"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, the resulting depreciation of existing capital, the general competitive struggle and the necessity of improving the product and expanding the scale of production, for the sake of self-preservation and on penalty of failure. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law independent of the producers and become ever more uncontrollable. This eternal contradiction seeks to balance itself by an expansion of the outlying fields of production. But to the extent that the productive power develops, it finds itself at variance with the narrow basis on which the conditions of consumption rest. On this self-contradictory basis it is no contradiction at all that there should be an excess of capital simultaneously with an excess of population. For while a combination of these two would indeed increase the mass of the produced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplus-value is produced and those under which it is realised.” 
For Luxemburg, Marx’s admission that “the market must, therefore, be continually extended” “obviously” transcends the consumption of capitalists and workers and she takes it as confirmation of her assumption that there must be another group of consumers outside of the main classes in capitalism for capital’s ever-growing mass of commodities.
From this she concludes that “the realisation of surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists”. 
Is this a reasonable conclusion to draw?
Capital’s inherent tendency towards overproduction
It’s true that the potential role played by non-capitalist buyers is necessarily abstracted from Marx’s analysis of the inherent limits of capitalist production and we know he was unable to complete his planned volume of Capital dealing with the world market. Nevertheless, his main argument seems clear enough: the inherent limits on consumption of both capitalists and workers due to capital’s “antagonistic conditions of distribution” lead to overproduction.
This is entirely consistent with all Marx’s arguments against those bourgeois political economists who tried to deny the existence of overproduction in capitalism – arguments which might appear to give support to Luxemburg’s thesis. For example:
"He (Ricardo) overlooks the fact that the commodity has to be converted into money. The demand of the workers does not suffice, since profit arises precisely from the fact that the demand of the workers is smaller than the value of their product, and that it [profit] is all the greater the smaller, relatively, is this demand. The demand of the capitalists among themselves is equally insufficient. Over-production does not call forth a constant fall in profit, but periodic over-production recurs constantly. It is followed by periods of under-production etc. Over-production arises precisely from the fact that the mass of the people can never consume more than the average quantity of necessaries, that their consumption therefore does not grow correspondingly with the productivity of labour”. 
Or similarly, if we take this quote:
“If it is said, finally, that the capitalists only have to exchange their commodities among themselves and consume them, then the whole character of capitalist production is forgotten, and it is forgotten that that what is involved is the valorization of capital, not its consumption”;
the same passage directly continues:
“In short, all the objections raised against the obvious phenomena of over-production (phenomena that remain quite impervious to these objections) amount to saying that the barriers to capitalist production are not barriers to production in general and are therefore also not barriers to this specific, capitalist mode of production.” 
And finally this: “if the demand exterior to the demand of the labourer himself disappears or shrinks up, then the collapse occurs”.  Is this proof of Luxemburg’s thesis? Marx is once again here dealing with the arguments of Ricardo et al who deny the reality of overproduction caused by capital’s problem of realisation, reminding them that, “as Malthus says, ‘the very existence of a profit upon any commodity pre-supposes a demand exterior to that of the labourer who has produced it’, and hence the demand of the labourer himself can never be an adequate demand”.
In other words, the workers must by definition produce more than they can themselves consume, otherwise there would be no profit; Marx is again pointing to the inherent limits on consumption which must result in overproduction.
The conclusion from all this seems inescapable: if we are to fully accept Marx’s analysis of capital’s inherent problem of realising surplus value which inevitably results in overproduction then we must reject Luxemburg’s conclusion that “the realisation of surplus value for the purposes of accumulation is an impossible task for a society which consists solely of workers and capitalists” as an incorrect interpretation of this analysis.
The role of capital’s non-capitalist surroundings in its development
So where does that leave the historical aspect of Luxemburg’s theory: that the accumulation of capital depends on non-capitalist social strata and forms of social organisation?
If we continue to follow Marx’s analysis of capital’s problem of realising surplus value we must logically reject Luxemburg’s thesis that capital needs these in order to accumulate. But this does not mean that capital’s non-capitalist surroundings do not play a vital role in its development.
Perhaps the most obvious example is the English cotton industry, the first truly capitalist branch of production, which of course depended on the shipping of millions of African Negroes to America to provide the labour power for the plantations. In this way non-capitalist labour played a crucial role in the development of industrial capitalism; in fact for Marx it was just as much the ‘pivot’ of bourgeois industry as machinery and credit because, very succinctly, “Without slavery you have no cotton; without cotton you have no modern industry. It is slavery that gave the colonies their value; it is the colonies that created world trade, and it is world trade that is the pre-condition of large-scale industry.”  The cotton picked by ‘liberated’ non-capitalist labour and shipped to the English factories became the cheap commodities sold to the peasants of Asia and Africa as capital’s “heavy artillery, with which it batters down all Chinese walls” (Manifesto).
t is therefore perfectly possible to agree with Luxemburg that capital arises within a non-capitalist society and develops through an exchange relationship with its non-capitalist surroundings; it needs markets for its ever-growing mass of commodities as well as unrestricted access to supplies of raw materials and additional labour to ensure the conditions for expanded production; capital proceeds by destroying and assimilating its non-capitalist surroundings with the ultimate aim of establishing its exclusive domination, as the Communist Manifesto describes vividly.
The 'liberation' of non-capitalist labour power - plantation slavery in the Southern US
But while we can agree with the general notion that “Historically, the accumulation of capital is a kind of metabolism between capitalist economy and … pre-capitalist methods of production”  and that “capitalism needs non-capitalist social organisations as the setting for its development”,  we must continue to reject the theoretical assumption underlying Luxemburg’s whole historical vision of this relationship that “capital cannot accumulate without the aid of non-capitalist organisations”. 
Rather, the existence of non-capitalist social strata and forms of social organisation provide a vital means for capital to alleviate its inherent problem of realising surplus value by enabling it to extend the market, both internally but above all externally, for its ever-growing mass of commodities.
The destruction and assimilation of its non-capitalist surroundings removes the most important opportunity to expand the outlying field of production and significantly restricts capital’s ability to continually extend the market, inevitably exacerbating all its inherent contradictions.
The competitive struggle of the advanced capitalist powers for what remains open of the non-capitalist environment in the late 19th century is undoubtedly a major factor in explaining the phenomenon of imperialism.
Luxemburg acknowledges that at the time (1913) this non-capitalist environment still constituted the largest part of the world in terms of geography but, given the development of the productive forces in the oldest capitalist countries and the accelerating pace of destruction, it had become insufficient for the needs of expanded production.
Just as the insufficiency absence of non-capitalist buyers exacerbates capital’s problem of realising surplus value, so we must conclude that the insufficiency of its non-capitalist surroundings can only exacerbate all its contradictions, leading as in Luxemburg’s own conclusion, to the onset of its decay or decadence, “the final phase of capitalism” which she presciently characterises as a “period of catastrophe”. 
Any debate on Luxemburg’s theory of accumulation must begin from the recognition of capit
al’s problem of realising surplus value. Luxemburg clearly recognises this problem but by emphasising the supposed deficiencies of Marx’s purely hypothetical diagram of accumulation, which assumes the identity of the production and realisation of surplus value, she sees the appearance of this phenomenon - an ever-bigger amount of commodities being thrown onto the market – not as an inevitability but an ‘absurdity’, instead concluding not only that there must be a group of consumers for capital’s ever-growing amount of commodities outside of capitalism but that in the absence of this group accumulation is impossible.
Luxemburg poses the question: how does capital as a whole reproduce itself?
And Marx in the section of Capital she herself cites gives an answer that is as precise as it can be for a mode of production based on an inherent contradiction between its tendency towards the unlimited development of the productive forces and the limited capacity of society to consume: the system as a whole must attempt to resolve this irresolvable contradiction by continually extending the market.
In other words, the inherent limits on consumption of both capitalists and workers due to the laws of accumulation lead not to the impossibility of accumulation but the inevitability of overproduction.
Luxemburg’s theoretical conclusion that accumulation is impossible without non-capitalist buyers is, it is suggested here, must be rejected as an incorrect interpretation of Marx’s analysis of capital’s inherent contradictions, while her historical analysis is a significant contribution to understanding of capital’s dependence on its non-capitalist surroundings for its development but it is undermined by being based on her conclusion that non-capitalist buyers are necessary for capital to realise surplus value.
If we can agree that capital develops through an exchange relationship with its non-capitalist surroundings and proceeds by destroying and assimilating them, to remain consistent with Marx's analysis we must affirm that this process leads not towards the theoretical impossibility of accumulation but to the exacerbation of all its contradictions.
We can therefore conclude by endorsing Luxemburg’s theory that the insufficiency of the remaining non-capitalist environment in 1914 leads - along with other factors - to inter-imperialist warfare and the onset of capitalist decadence, while freed of the necessity of trying to explain how, if capital supposedly needs non-capitalist buyers in order to accumulate, and if these were insufficient for its needs in 1914, it has still managed to survive for over 100 years of decadence.
 Capital, Volume 3, Chapter 15, quoted in The Accumulation of Capital, Routledge and Kegan Paul, 1963, pp.343-5, my emphasis.  The Accumulation of Capital p.350.  Theories of Surplus Value, Part 2, Chapter 16, Lawrence & Wishart, 1969, p.468, my emphasis.  Capital, Volume 3, Chapter 15, Penguin, 1981, p.366, my emphasis.  Grundrisse, Chapter on Capital, Penguin, 1973, p.420, my emphasis.  Marx, The Poverty of Philosophy, Progress, 1975, p. 104.  The Accumulation of Capital, p.416.  Op. Cit., p.366.  Op. Cit., p.416.
 Op. Cit., p.446.