Since the 1970s, debates between organisations of the Communist Left on the explanation for capital’s historic crisis have tended to be polarised been supporters of the ‘saturation of markets’ versus the falling rate of profit (FRoP). In a previous text, I described how, as the result of discussions on Luxemburg’s theory begun on the ICC forum, I was led to conclude that Luxemburg’s theory is an incorrect interpretation of Marx’s analysis of capital’s inherent contradictions and that 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.
But does a rejection of Luxemburg’s theory necessarily mean agreement with the arguments of those who support the alternative position of the FRoP?
The essential argument of supporters of the falling rate of profit theory is that the explanation for capital’s historic crisis must be sought in the process of the production, because that is where value is created, rather than in the process of the circulation of the resulting commodities. The law of the tendency for the rate of profit to fall is thus the central contradiction of capitalist production and Luxemburg’s explicit rejection of it as the cause of capital’s breakdown places her theory outside of Marxism. [1]
However, any debate on Luxemburg’s theory of accumulation needs to begin with a recognition that she was trying to address a real question: the problem for capital of realising surplus value. Briefly, the only motive and purpose of capital 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 it is here that capital faces barriers due to its own relations of production which restrict society’s capacity to consume while at the same time while at the same time producing an ever-growing mass of commodities.
For Marx, capital can only attempt to resolve this inherent contradiction between the conditions for the production of surplus value and its realisation by continually extending the market. However, the growth of productivity, driven by the FRoP, 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 the inherent limits on consumption due to its own social relations:
“The contradiction of the capitalist mode of production […] lies precisely in its tendency towards an absolute development of the productive forces, which continually come into conflict with the specific conditions of production in which capital moves, and alone can move. There are not too many necessities of life produced, in proportion to the existing population. Quite the reverse. Too little is produced to decently and humanely satisfy the wants of the great mass […] On the other hand, too many means of labour and necessities of life are produced at times to permit of their serving as means for the exploitation of labourers at a certain rate of profit. 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, i.e., too many to permit of the consummation of this process without constantly recurring explosions […] It is for this reason that the capitalist mode of production meets with barriers at a certain expanded stage of production which, if viewed from the other premise, would reversely have been altogether inadequate. It comes to a standstill at a point fixed by the production and realisation of profit, and not the satisfaction of requirements.” [2]
For Marx, this contradiction results in an inherent tendency towards overproduction.
So the circulation or consumption of commodities, far from being a secondary question as some supporters of the FRoP suggest, 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, requiring the continuous extension of the market. But as Marx points out, externally there are limits to capital’s ability to do this. [3]
Due to its very nature, capitalist production must always tend to exceed the available market. And this contradiction, once set in motion, can only intensify capital’s inherent tendency towards overproduction, driving it inexorably towards its historic crisis.
Of course whether it is the problem of realisation or the falling rate of profit that is the key factor in explaining capital’s historic crisis – or whether as is more likely it is an interplay of these and other factors – remains very much a question for debate. But it’s hard to avoid the conclusion that for over 40 years this debate has been falsely polarised:
- For supporters of the FRoP it is a question of recognising 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 in explaining its historic crisis. It’s also a question of recognising that the role of capital’s non-capitalist environment in its historical development – as a source of raw materials and additional labour as well as consumers to alleviate overproduction – needs to be fully acknowledged as part of understanding how this contradiction works itself out (the role of the Atlantic slave trade in the rise of the English cotton industry is an obvious example).
- For supporters of the ‘saturation of markets’ (although this is not a term ever used by Luxemburg) it is a question of recognising that the problem of realisation does not imply agreement with the thesis that it is impossible for capital to accumulate without non-capitalist buyers: if this is the case then it is necessary to explain convincingly why, if the non-capitalist parts of the world were no longer sufficient for the needs of expanded production by 1913, as Luxemburg herself argued [4], capital has not only been able to continue to accumulate for over 100 years but also to give rise to the appearance of spectacular growth (eg. the ‘post-war boom’ and the rise of China).
MH
October 2020
[1] See for example “The Accumulation of Contradictions or The Economic Consequences of Rosa Luxemburg”, a lengthy critique of Luxemburg’s theory by the Communist Workers’ Organisation first published in 1976, reprinted in 2007 and still available on their website. See also by the CWO “The Dynamic of Capitalism and Its Crisis - A Reply to the ICC - Part One, 2007. [2] Capital Volume 3, Chapter 15, International Publishers online edition, my emphasis. [3] “However, the mere admission that the market must expand with production, is, on the other hand, again an admission of the possibility of over-production, for the market is limited externally in the geographical sense, the internal market is limited as compared with a market that is both internal and external, the latter in turn is limited as compared with the world market, which however is, in turn, limited at each moment of time, [though] in itself capable of expansion” (Theories of Surplus Value, Part 2, Chapter 17, Section 13, Lawrence & Wishart, 1969, p.524, my emphasis). It could be argued that it is this definite limit on the extension of the external market that Luxemburg’s theory points to. [4] See The Accumulation of Capital, Routledge and Kegan Paul, 1963, p.446.