Luxemburg's Accumulation of Capital

[citizen of industry]

I realize I'm walking into a shitstorm on this one, but it is a legitimate question. After studying Capital and Grundrisse many people pointed the finger and said I was an "underconsumptionist" and "Luxemburgist." At the time, I hadn't read any Luxemburg at all, so I decided I'd better, and read Accumulation of Capital. I know many/most Marxists see her theory as flawed, but for the life of me I can't figure out why. Maybe I'm missing some glaring error?

I realize that the capital goods market is larger than the consumer goods market, hence "the capitalists are their own biggest customers (Lenin)," but in a simple reproduction scheme the capitalists would have to consume a huge amount of commodities because the workers don't have the purchasing power to consume it all. In enlarged reproduction, if the capitalists use some of their surplus to expand production, there is an even larger glut. If production was expanded but the capitalists couldn't realise their surplus value because nobody would have the purchasing power, there would be crisis. Therefore, capitalism by nature is imperialist, it has to look for markets outside of a particular nation.

Sure, credit can boost purchasing power, therefore the surplus can be realised and production can expand. But then there is the tendency of the rate of profit to fall as more is invested in constant capital. Even with credit, there is still a glut, hence the capitalist has to look elsewhere, overseas to realise the surplus. How does the capitalist slow the rate of profit to fall? By finding cheaper raw materials or cheaper labor, another reason why it can't function in a closed system and has to go outside of borders, depending on a "third world" for the latter.

Some say Luxemburg didn't account for "third persons," e.g; neither capitalists or workers. But she clearly does. Like Marx in Capital, she points out that the service industry gets its revenue from both capitalists and workers, either from surplus or variable capital, profits or wages, so it can be reduced out of the equation.

This seems apparent in daily life to me as well. After the 2008 crisis, the dollar fell in value, causing a crisis in Japan because the yen is now much stronger, therefore it is much harder to export. Japan must export, because it is impossible for the Japanese to consume all of the product. There is also TPP (trans-pacific partnership), another "free trade" agreement like NAFTA only for Asia. The US is pushing this I suspect because they are trying to get their economy out of the shitter by increasing exports. I suppose the Japanese government is willing to accept this disadvantageuos agreement because if the US economy improves, the dollar will rise and the large Japanese manufacturers will be able to increase export as well, though at the expense of small industry and agriculture.

[citizen of industry]

Nobody? Is it because everyone was purged or am I preaching to the choir?

[Rocky Rococo]

I suspect that the reality is that like me, most here have not read Luxemburg's text so we have no basis for commenting.

[citizen of industry]

I highly recommend it.

[Niccolò Rossi]

Best advice is ask on the Redmarx forum. ZeroNowhere and S.Artesian post there now since being purged. They're probably the best versed on the topic, I know they've both posted about it in the past, I think.

[Blake's Baby]

Jock from the ICT once explained to me in great detail why Luxemburg was wrong; he recommended a pamhlet that the CWO (British section of the ICT) had produced but I can't find it online. If you can contact the ICT - website is here http://www.leftcom.org/en - maybe they can help; for the other side of the equation (pro-Luxemburg) the ICC have some good stuff - http://en.internationalism.org/ - though a quick search on their site reveals more than 500 articles or comments mentioning Luxemburg so it may be hard to find what you're looking for.

[Desperado]

This is something that's really been bugging me as well. What I can't follow is if this is not at all how crisis is caused (as some claim) or if this is only part of the story, what's the other issues? The falling rate of profit? Imbalance between production of consumer goods and capital goods? Finance and "productive" capital?

If you could update me if you get a definitive answer anywhere, sailorjay, I'd really appreciate it.

[Blake's Baby]

My undersatnding of the nuances is hazy at best but I think this is more or less right as far as the cause of crisis:

The 'pro-Luxemburg' position is that capital can never buy back the amount of goods produced, because the workers and capitalists between them can never own more purchasing power than the value of the goods on sale, so there is a structural (and growing) imbalance between 'value' of goods and purchasing power.

The contra-position (the 'Grossman-Mattick' position) is that crisis is the result of the fall in the rate of profit.

Neither theroy entirely discounts the other; Grossman-Mattick admits a place for imbalances in the production-consumption cycle, and Luxemburg admits a place for the falling rate of profit. But at rock bottom they are two different and incompatable theories.

[Blake's Baby]

Best advice is ask on the ******* forum...

Have you been censored comrade?

Are we not allowed to refer to other forums now, or is it just that one that's deemed a forum too far?

If we're not allowed to refer to other forums I better 'fess up to someone that I posted a link to LibCom earlier.

[Le Libérer]

Have you been censored comrade?

Are we not allowed to refer to other forums now, or is it just that one that's deemed a forum too far?

If we're not allowed to refer to other forums I better 'fess up to someone that I posted a link to LibCom earlier.

Theres nothing new about that policy. Its been around since 2004 during the first splinter of the board.

Dont worry, libcom and revleft have a very respectful relationship so I dont forsee it being filtered anytime soon.

[Niccolò Rossi]

Get fucked

[Leo]

Two articles by the ICC on Luxemburg's Accumulation of Capital:

http://en.internationalism.org/ir/142/luxemburg

http://en.internationalism.org/ir/145/decadence-09-luxemburgism-1924


for the other side of the equation (pro-Luxemburg) the ICC have some good stuff

Actually, there also are comrades who disagree with Luxemburg's analysis and explain decadence with the falling rate of profit in the ICC.


Neither theroy entirely discounts the other; Grossman-Mattick admits a place for imbalances in the production-consumption cycle, and Luxemburg admits a place for the falling rate of profit. But at rock bottom they are two different and incompatable theories.

If neither discounts the other, why do you think the theories themselves are incompatible? Mattick and Luxemburg's views are obviously not compatible because Mattick actually says Luxemburg is wrong and does discount her theory. I personally feel closer to to seeing Luxemburg's analysis as explanatory of the main reason behind the crisis but do not deny the fact that the falling rate of profit also has a significant part in it.

[Blake's Baby]

Two articles by the ICC on Luxemburg's Accumulation of Capital:

http://en.internationalism.org/ir/142/luxemburg

http://en.internationalism.org/ir/145/decadence-09-luxemburgism-1924

Actually, there also are comrades who disagree with Luxemburg's analysis and explain decadence with the falling rate of profit in the ICC.

If neither discounts the other, why do you think the theories themselves are incompatible? Mattick and Luxemburg's views are obviously not compatible because Mattick actually says Luxemburg is wrong and does discount her theory. I personally feel closer to to seeing Luxemburg's analysis as explanatory of the main reason behind the crisis but do not deny the fact that the falling rate of profit also has a significant part in it.

Come on Leo, are you just disagreeing with me for the hell of it?

I know some ICC comrades defend the Grossman-Mattick position, I never claimed otherwise; however, the point was that the ICC had some good pro-Luxemburg stuff. Do you disagree? No you don't.

As to the theories discounting each other - Grossman-Mattick regards the fundamental cause of the crisis to be the failing rate of profit; the imbalance between production and consumption (inability to realise profit etc) is not a fundamental cause of crisis but it a secondary factor.

Luxemburg's theory regards the inability of consumers to purchase all of production as the fundamantal cause of the crisis; but sees the failing rate of profit as being a secondary factor influencing the crisis.

Thus the two theories are incompatible as I said, because they explain the root cause of the crisis by different mechanisms, but they each refer to aspects of the other as influencing factors, which is why they refer to each other in part, as I also said.

Happy now?

[Leo]

Come on Leo, are you just disagreeing with me for the hell of it?I wasn't even disagreeing with you. I simply asked you a question to elaborate the question.


I know some ICC comrades defend the Grossman-Mattick positionI'm sure you do but I don't think everyone does. I was trying to elaborate the situation.


however, the point was that the ICC had some good pro-Luxemburg stuff. Do you disagree? No you don't.Agreeing with most of them, I don't. I posted links to a couple of them, if case you haven't noticed.


As to the theories discounting each other - Grossman-Mattick regards the fundamental cause of the crisis to be the failing rate of profit; the imbalance between production and consumption (inability to realise profit etc) is not a fundamental cause of crisis but it a secondary factor.

Luxemburg's theory regards the inability of consumers to purchase all of production as the fundamantal cause of the crisis; but sees the failing rate of profit as being a secondary factor influencing the crisis.Yes, they are incompatible in that they disagree over what is the fundamental cause. However it is possible to hold a position (not that I hold a position like this) saying that both are equally fundamental.

What I am trying to stress is that this isn't a black and white issue.


Happy now? Not particularly? Maybe you should try to calm down a little bit.

[Blake's Baby]

I wasn't even disagreeing with you... Maybe you should try to calm down a little bit.

In which case I appologise and agree that perhaps I should.

[Desperado]

Does anybody know what David Harvey's position is? I've invested in some of his books for Christmas and'd like to know first. That cool RSA video seems to tend towards Luxembourg, although most of what he says in it is pretty evident, theories aside.

[Dave B]

The problem I believe with the ‘Luxemburg’ argument; which revolves around the proposition, in various forms, that as the workers produce more value than they are given back in wages then the whole thing falls over etc.

Is actually caused by a flaw in Karl’s own theoretical model of the two departments of capital, famously from volume II, and thus the analysis that flows from it.

The problem is that there are in fact 3 departments of capital, the 3rd is missed out because Karl foolishly dropped it early on in Volume I.


The problem originated in a schoolboy chemical engineer mass balance error in chapter nine.


In order to explain it we need to look at the example that he gave there and in the process introduce some new terms apart from c, v and s, and to some extent a re-evaluation of what they mean.

These I will designate;

F(uc) = fixed un-consumed capital

( the value of the machinery that whilst necessary and used in the production process in a ‘turnover’ but doesn’t transfer its value to the finished product)

And;

F(con) = fixed consumed capital

[The value machinery that does transfer its value into the finished product; as Karl’s ‘c’ does go on to include F(con) as part of his ‘c’. I now choose to separate it, and thus my ‘c’ is purely the value of the direct raw material that goes into the finished product. Thus the cotton and the coal etc is ‘c’, and the used up spindles or whatever is F(con).]

Then if we take his own example from chapter 9 we have;


1000 F(uc) + 54 F(con) + 356c* + 90v + 90s ---------- 590(product) + 1000F(uc)

red here is the value being transfered into the product and there should be an arrow in standard chemistry and mass balnce notation to the RHS

*he is being a pain here with having c separated the raw material into 312 (ie cotton) and auxiliary raw material 44 (ie coal) thus = 356


I am also using the “----------” notation rather than “=”; because I am a chemist and it is better.

What he does then, ‘throughout his book’, is to drop 1000 F(uc)

[as it appears on both sides or ‘returns’]

from the rest of his ‘equations’, and the lesser sin of conflating 54 F(con) with 356c to make it ‘c’ ‘proper’.

This had catastrophic consequences elsewhere later in the calculation of the rate of profit as that ‘actually’ needed to be calculated from advanced capital and the ‘dropped’ 1000 F(uc) was part of advanced capital.


Something that Fred had to patch up in his insert in chapter 13 of volume III.

Anyway;

This would not have had any consequences to the standard two departments of capital argument as in chapter 49 thus;



I) 4,000c + 1,000v + 1,000s = 6,000

II) 2,000c + 500v + 500s = 3,000

http://www.marxists.org/archive/marx/works/1894-c3/ch49.htm


If the dropped 1000 F(uc) was returning and remained unchanged on both sides, of for what it matters of both equations, then it wouldn't matter.


However ‘if’ the dropped or missing F(uc) was increasing then that would require and outflow or outlet for surplus value.


Thus you would have in the amended model one department producing ‘human’ consumption goods for both capitalists and workers.

Another producing raw materials to make them with etc.

But yet another to expand and increase the value of productive machinery, F(uc) or ‘dead labour’ that facilitates the raising of the productivity of labour.

That F(uc) or ‘dead labour’ would be purchased of course by the capitalist out of the surplus value.

And if you are not sure what F(uc) is, it is the oil refineries and high value robots etc that are used in modern factories etc.

If you doubt whether or not F(uc) is significantly increasing and should have been considered; then you need to ask the question whether or not generally the value of machinery that workers work with has a tendency increase, paid for bout of surplus value.

A tendency that would be theoretically driven by the fact that the value embodied in productive machinery drives down the amount of labour time of producing something and its value thus providing a competitive edge to the capitalists who employ it.


People like Lenin etc were barking up the correct tree but as F(con) was buried in ‘c’ and F(uc) and its own department was invisible they did struggle with it.

What has happened to ZeroNowhere and S.Artesian? Am I allowed to ask?

[citizen of industry]

The problem I believe with the ‘Luxemburg’ argument; which revolves around the proposition, in various forms, that as the workers produce more value than they are given back in wages then the whole thing falls over etc.

Is actually caused by a flaw in Karl’s own theoretical model of the two departments of capital, famously from volume II, and thus the analysis that flows from it.

The problem is that there are in fact 3 departments of capital, the 3rd is missed out because Karl foolishly dropped it early on in Volume I.


The problem originated in a schoolboy chemical engineer mass balance error in chapter nine.


In order to explain it we need to look at the example that he gave there and in the process introduce some new terms apart from c, v and s, and to some extent a re-evaluation of what they mean.

These I will designate;

F(uc) = fixed un-consumed capital

( the value of the machinery that whilst necessary and used in the production process in a ‘turnover’ but doesn’t transfer its value to the finished product)

And;

F(con) = fixed consumed capital

[The value machinery that does transfer its value into the finished product; as Karl’s ‘c’ does go on to include F(con) as part of his ‘c’. I now choose to separate it, and thus my ‘c’ is purely the value of the direct raw material that goes into the finished product. Thus the cotton and the coal etc is ‘c’, and the used up spindles or whatever is F(con).]

Then if we take his own example from chapter 9 we have;


1000 F(uc) + 54 F(con) + 356c* + 90v + 90s ---------- 590(product) + 1000F(uc)

red here is the value being transfered into the product and there should be an arrow in standard chemistry and mass balnce notation to the RHS

*he is being a pain here with having c separated the raw material into 312 (ie cotton) and auxiliary raw material 44 (ie coal) thus = 356


I am also using the “----------” notation rather than “=”; because I am a chemist and it is better.

What he does then, ‘throughout his book’, is to drop 1000 F(uc)

[as it appears on both sides or ‘returns’]

from the rest of his ‘equations’, and the lesser sin of conflating 54 F(con) with 356c to make it ‘c’ ‘proper’.

This had catastrophic consequences elsewhere later in the calculation of the rate of profit as that ‘actually’ needed to be calculated from advanced capital and the ‘dropped’ 1000 F(uc) was part of advanced capital.


Something that Fred had to patch up in his insert in chapter 13 of volume III.

Anyway;

This would not have had any consequences to the standard two departments of capital argument as in chapter 49 thus;



I) 4,000c + 1,000v + 1,000s = 6,000

II) 2,000c + 500v + 500s = 3,000

http://www.marxists.org/archive/marx/works/1894-c3/ch49.htm


If the dropped 1000 F(uc) was returning and remained unchanged on both sides, of for what it matters of both equations, then it wouldn't matter.


However ‘if’ the dropped or missing F(uc) was increasing then that would require and outflow or outlet for surplus value.


Thus you would have in the amended model one department producing ‘human’ consumption goods for both capitalists and workers.

Another producing raw materials to make them with etc.

But yet another to expand and increase the value of productive machinery, F(uc) or ‘dead labour’ that facilitates the raising of the productivity of labour.

That F(uc) or ‘dead labour’ would be purchased of course by the capitalist out of the surplus value.

And if you are not sure what F(uc) is, it is the oil refineries and high value robots etc that are used in modern factories etc.

If you doubt whether or not F(uc) is significantly increasing and should have been considered; then you need to ask the question whether or not generally the value of machinery that workers work with has a tendency increase, paid for bout of surplus value.

A tendency that would be theoretically driven by the fact that the value embodied in productive machinery drives down the amount of labour time of producing something and its value thus providing a competitive edge to the capitalists who employ it.


People like Lenin etc were barking up the correct tree but as F(con) was buried in ‘c’ and F(uc) and its own department was invisible they did struggle with it.

What has happened to ZeroNowhere and S.Artesian? Am I allowed to ask?



Even accounting for the third department, though, we still have just a diagram for simple reproduction. The problem is when production is expanded. Any use of surplus value to expand any department results in a glut in consumer goods due to a decrease in purchasing power. The Luxemburg argument isn't that the whole thing will "topple," just that it can't function in a closed system. The glut will have to be purchased elsewhere, as with labor and raw materials. The tendency of the rate of profit to decline strengthens the argument. Basically that "capitalism in one country" doesn't work and that capitalism depends on non-capitalist territories (colonies, etc.) to grow, hence imperialism. I think today rather than "non-capitalist" we can say "third-world."

She gives as example bank loans, say from a European country to a African nation. The African nation then uses the loans to purchase production goods, railroads, etc. from the same European country, which results in enlarged production and an outlet for the surplus goods in the exporting country (along with capital flight and debt in the importing one), which in turn destroys the natural economy of the (importing) country and a capitalist mode of production springs up in its place. If it is a "break down" theory, it is only if the whole world would be developed on capitalist lines. But before that eventuality, she was pointing more towards world wars, "barbarism, " etc.

[Blake's Baby]

Been over at LibCom reading another thread on Rosa when this popped up:

http://www.leftcom.org/en/articles/2007-08-13/the-accumulation-of-contradictions-or-the-economic-consequences-of-rosa-luxembur

That should be a link to the ICT/CWO pamphlet I referred to.