Introduction (2)

An abstract deductively elaborated theory never coincides directly with appearances. In this sense the theory of accumulation and breakdown expounded above does not directly correspond with the appearances of bourgeois society in its day to day life. The conditions of capitalism conceived in its pure form (which we have analysed so far) and those of the system in its empirical manifestations (which we have to analyse now) are by no means identical. This is because a theoretical deduction involves working with simplifications; many real factors pertaining to the world of appearances are consciously excluded from the analysis.

So far we have assumed:

i) that the capitalist system exists in isolation - that there is no foreign trade;

ii) that there are only two classes — capitalists and workers;

iii) that there are no landowners, hence no groundrent;

iv) that commodities exchange without the mediation of merchants;

v) that the rate of surplus value is constant and corresponds to the magnitude of the wage — that is a rate of surplus value of 100 per cent;

vi) that there are only two spheres of production, producing means of production and means of consumption;

vii) that the rate of growth of population is a constant magnitude; viii) that the value of labour power is constant;

viii) that in all branches of production capital turns over once a year.

Any theory has to work with such provisional assumptions which are a potential source of mistakes. But these assumptions have allowed us to determine the direction in which the accumulation of capital works, even if the results of this analysis have a provisional character.

Marx was perfectly conscious of the abstract, provisional nature of his law of accumulation and breakdown. Having presented ‘the absolute general law of capitalist accumulation’, he says that ‘Like all other laws it is modified in its working by many circumstances, the analysis of which does not concern us here’ (1954, p. 603). Elsewhere, in describing the process of accumulation, he writes: ‘This process would soon bring about the collapse of the capitalist production were it not for counteracting tendencies’ (1959, p. 246). Marx gave an analysis of these counteracting tendencies in various places in Capital Volume Three as well as in Theories of Surplus Value.

Once we have shown the tendency of accumulation in its pure form we have to examine the concrete circumstances under which the accumulation of capital proceeds, in order to see how far the tendency of the pure law is modified in its realisation. We are asking whether, and if so in what direction, the tendencies of development of the pure system are changed once this system reincorporates, by degrees, foreign trade, landowners who live off groundrent, merchants and the middle classes — and once the rate of surplus value or the level of wages are allowed to vary. These considerations mean that the abstract analysis comes closer to the world of real appearances. It enables us to verify the law of breakdown: to see to what extent the results of the abstract theoretical analysis are confirmed by concrete reality.

Considering the gigantic increases in productivity and the enormous accumulation of capital of the last several decades the question arises —why has capitalism not already broken down? This is the problem that interests Marx:

the same influences which produce a tendency in the general rate of profit to fall, also call forth counter-effects, which hamper, retard, and partly paralyse this fall. The latter do not do away with the law, but impair its effect. Otherwise, it would not be the fall of the general rate of profit, but rather its relative slowness, that would be incomprehensible. Thus, the law acts only as a tendency. And it is only under certain circumstances and only after long periods that its effects become strikingly pronounced. (1959, p. 239)

Once these counteracting influences begin to operate, the valorisation of capital is reestablished and the accumulation of capital can resume on an expanded basis. In this case the breakdown tendency is interrupted and manifests itself in the form of a temporary crisis. Crisis is thus a tendency towards breakdown which has been interrupted and restrained from realising itself completely.

Return for a moment to the illustration of the cyclical process of accumulation in Figure 2 above.

Due to the very nature of the accumulation process there is a basic difference between the two phases of the cycle with respect to their duration and their character. We have seen that only the phase of accumulation is defined by a specific regularity; that only the length of the expansion phase(O-Z1, O-Z2...) and the timing of the downturn into a crisis are open to exact calculation. No such calculation is possible with respect to the duration of the crisis (Z1-O1, Z2-O2 ... ). At Zl, Z2, and so on valorisation collapses. The ensuing overproduction of commodities is a consequence of imperfect valorisation due to overaccumulation. The crisis is not caused by disproportionality between expansion of production and lack of purchasing power — that is, by a shortage of consumers. The crisis intervenes because no use is made of the purchasing power that exists. This is because it does not pay to expand production any further since the scale of production makes no difference to the amount of surplus value now obtainable. So on the one hand purchasing power remains idle. On the other, the elements of production lie unsold.

At first only further expansion of production becomes unprofitable; reproduction on the existing scale is not affected. But with each cycle of production this changes. The portion of the surplus value earmarked for accumulation each year goes unsold. As inventories build up the capitalist is forced to sell at any price to obtain the resources to keep the enterprise going on its existing scale. He is compelled to reduce prices and cut back on his scale of production. The scale of operations is reduced or they shut down completely. Many firms declare bankruptcy and are devalued. Huge amounts of capital are written off as losses. Unemployment grows.

This sickness leads in one of two directions. Either there is nothing to stop the breakdown tendency from working itself out and the economy simply ceases to function; or specific measures are undertaken to counteract the sickness so that the sickness is stopped and turns into a healing process. The question arises: how is a crisis surmounted? How is a new period of upswing initiated? The mere statement that crises are a form of sickness is quite useless if we have no conception of what this sickness is caused by. The specific means by which a crisis is surmounted are obviously closely related to the diagnosis of the sickness. The remedies prescribed would vary according to whether the underlying cause of crises is seen as the underconsumption of the masses, as disproportions between branches of production or as a shortage of capital.

There are, of course, cases where the boom has been precipitated by a massive flow of funds from abroad — for instance, the huge imports of American capital into Germany over 1926—7. But in numerous instances —and this is the general rule — crises have been surmounted without any flow of foreign funds. And just as crises have been surmounted while many of its so-called causes (for instance, underconsumption of the masses) are still present, so we find that all the factors generally cited to explain the boom turn out to be quite useless in explaining how the depression itself is overcome. The remedies proposed are not logically connected with the diagnosis of industrial sickness.

In contrast to these various theories, our theory shows that the means actually enforced to surmount a crisis correspond perfectly to the actual causes of industrial sickness in our analysis. In this sense the theory provides a consistent explanation of the two phases of the industrial cycle, both of the turn from expansion to crisis and of the process through which the crisis is later surmounted. From the argument that crises are caused by an imperfect valorisation of capital it follows that they can only be overcome if the valorisation of capital is restored. But this cannot come about by itself, merely in the course of time. It presupposes a series of organisational measures. Crises are only surmounted through such a structural reorganisation of the economy.

The capitalist mechanism is not something left to itself. It contains within itself living social forces: on one side the working class, on the other the class of industrialists. The latter is directly interested in preserving the existing economic order and tries, in every conceivable way, to find means of ‘boosting’ the economy, of bringing it back into motion through restoring profitability.

The circumstances through which the crises can be overcome vary enormously. Ultimately however, they are all reducible to the fact that they either reduce the value of the constant capital or increase the rate of surplus value. In both cases the valorisation of capital is enhanced — the rate of profit rises. Such circumstances lie both within production and in the sphere of circulation, and pertain both to the inner mechanism of capital as well as to its external relations to the world market.

The capitalist’s continual efforts to restore profitability might take the form of reorganising the mechanism of capital internally (for instance, by cutting costs of production, or effecting economies in the use of energy, raw materials and labour power) or of recasting trade relations on the world market (international cartels, cheaper sources of raw material supply and so on). This involves groping attempts at a complete rationalisation of all spheres of economic life. Many of these measures fall while the programme of reorganisation is often completely beyond the reach of the smaller enterprises, which are thus wiped out. In the end capital finds suitable means of raising profitability and a reorganisation is gradually enforced. By its very nature the duration of this reorganisation and economic restructuring process is something purely contingent and therefore impossible to calculate.

In the pages that follow I shall not go into a detailed description of all the several countertendencies that hinder the complete working out of the breakdown. I shall confine myself to presenting only the most important of them and to showing how the operation of these countertendencies transforms the breakdown into a temporary crisis so that the movement of the accumulation process is not something continuous but takes the form of periodic cycles. We shall also see how, as these countertendencies are gradually emasculated, the antagonisms of world capitalism become progressively sharper and the tendency towards breakdown increasingly approaches its final form of an absolute collapse.