The End of Capitalism, The thought of Henryk Grossman By Ted Reese, Zero Books, 2022. Paperback, £13.99
‘Breakdown theory’ was a speciality in German-speaking Marxist circles. The revisionist Eduard Bernstein threw down the gauntlet in 1899 when he stated that capitalism would never break down of its own accord.
One of the first to take up the challenge and try to show that it would was Rosa Luxemburg. Another was Henryk Grossman. He agreed with Luxemburg that, if it couldn’t be demonstrated that capitalism would collapse, then the case for socialism would become just a moral one, but disagreed with her proposed solution. His argument, as set out in 1929 in his The Law of Accumulation and Breakdown of the Capitalist System, was that capitalism would collapse economically because eventually a point would be reached when not enough profits would be generated to keep capital accumulation going.
Grossman was born in 1881 in Kracow, now in Poland but then part of the Austro-Hungarian Empire. He joined the local Social Democratic Party and was active in agitation amongst Yiddish-speaking workers. After the war he found himself in Poland where he joined the Communist Party but, facing persecution, had to leave in 1925. He emigrated to Germany where he took up a post with the Institute of Social Research (Frankfurt School) for whom his book on the collapse of capitalism was written. He was always a sympathiser of the Communist Party and the USSR, though as Reese shows by no means an uncritical one, and in 1949 moved from the US to East Germany where he died in 1950.
To demonstrate his theory about capitalism eventually reaching a point where there would not be enough profits to continue capital accumulation, he accepted the assumptions made by the Austrian Social Democrat, Otto Bauer, to refute Luxemburg. The most important were that the accumulation of what Marx called ‘constant capital’ (machines, factories, materials, etc) would increase at 10 percent a year but that the amount (mass) of surplus value would increase at only 5 percent. The rate of exploitation (the ratio of surplus value to capital invested in hiring wage-workers) was assumed to be constant.
On the basis of these assumptions he was able to demonstrate mathematically that after 35 years capitalism would collapse because it would not be able to maintain a 10 percent annual increase in constant capital. By then the rate of profit would have fallen below 10 percent, which meant the mass of profits generated was below the level required to increase capital invested in machinery, etc by 10 percent. He called this ‘over-accumulation’.
This conclusion was in fact built into the assumption that the amount of profits would increase at a slower rate than the amount of constant capital (the figures don’t matter as long as the increase in profits is slower). This meant that the rate of profit would gradually fall from year to year. This would not be a problem as long as the amount of profits was greater than the amount of constant capital required. But, as soon as the rate of profit fell below the rate of increase of the constant capital, the increase in the amount of profits would not be enough.
The question that arises is how realistic were the assumptions on which Grossman’s based his ‘law of breakdown’.
It is obvious that the rate at which capital can accumulate must depend on the mass of profits made since that is where the additional capital comes from. The argument seems to be that competition forces capitalist enterprises to introduce more efficient machinery so as to stay in the battle of competition and that this sets the pace of capital accumulation, a pace that could come to be greater than the amount of profits available for this. This could happen in theory but not for long. If it did happen this would provoke an economic crisis but not the collapse of capitalism.
In practice, productivity increases at a rate of around 2 percent a year. There is no reason to suppose that the amount of profits could not – and has not – increased at a similar rate, especially as the rate of exploitation does not remain constant but goes up over time. In any event, capitalism has not collapsed through there not being enough profits to continue accumulation.
Reese seems to think that ‘the absolute limit to the accumulation of capital’ has already been reached. The evidence he presents for this is mainly about world debt levels which have, in his view, become unsustainable and will soon lead to global hyperinflation. Grossman would have expected ‘absolute over-accumulation’ to result in steadily growing unemployment, but that is not happening today.
Despite this, Reese’s work is a basic introduction to the life and views of Grossman.
Adam Buick
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