GROSSMANN'S REPRODUCTION SCHEMA

Henryk Grossman linked his reproduction schema to that set out by Otto Bauer. He noticed that it is not possible to continue it indefinitely without it in time coming up against contradictions. This is very easy to see. Otto Bauer assumes a constant capital of 200,000 which grows each year by 10 per cent and a variable capital of 100,000 which grows each year by 5 per cent, with the rate of surplus value being assumed to be 100 per cent, i.e., the surplus value each year is equal to the variable capital. In accordance with the laws of mathematics, a sum which increases each year by 10 per cent doubles itself after 7 years, quadruples itself after 14 years, increases ten times after 23 years and a hundred times after 46 years. Thus the variable capital and the surplus value which in the first year were each equal to half the constant capital are after 46 years only equal to a twentieth of a constant capital which has grown enormously over the same period. The surplus value is therefore far from enough to ensure the 10 per cent annual growth of constant capital.

This does not result just from the rates of growth of 10 and 5 percent chosen by Bauer. For in fact under capitalism surplus value increases less rapidly than capital. It is a well-known fact that, because of this, the rate of profit must continually fall with the development of capitalism. Marx devoted many chapters to this fall in the rate of profit. If the rate of profit falls to 5 per cent the capital can no longer be increased by 10 per cent, for the increase in capital out of accumulated surplus value is necessarily smaller than the surplus value itself. The rate of accumulation evidently thus has the rate of profit as its higher limit (see Marx, Capital, Volume III, p. 236, where it is stated that "the rate of accumulation falls with the rate of profit"). The use of a fixed figure - 10 percent which was acceptable for a period of a few years as in Bauer, becomes unacceptable when the reproduction schema are continued over a long period.

Yet Grossman, unconcerned, continues Bauer's schema year by year and believes that he is thereby reproducing real capitalism. He then finds the following figures for constant and variable capital, surplus value, the necessary accumulation and the amount remaining for the consumption of the capitalists (the figures have been rounded to the nearest thousand):

From the 35th year therefore accumulation - on the basis of the existing technical progress - cannot keep up with the pace of population growth. Accumulation would be too small and there would necessarily arise a reserve army which would have to grow each year (Grossmann, p. 126).

How, in what way, can accumulation lead to the collapse of capitalism?

...with the progress of capital accumulation the whole mechanism, despite periodic interruptions, necessarily approaches nearer and nearer to its end....The tendency to collapse then wins the upper hand and makes itself felt absolutely as `the final crisis' (p. 140).

...from our analysis it is clear that, although on our assumptions objectively necessary and although the moment when it will occur can be precisely calculated, the collapse of capitalism need not therefore result automatically by itself at the awaited moment and therefore need not be waited for purely passively (p. 601).

It thus appears that the idea of a necessary collapse for objective reasons is not at all in contradiction to the class struggle; that, on the contrary, the collapse, despite its objectively given necessity, can be widely influenced by the living forces of classes in struggle ant leaves a certain margin of play for the active intervention of classes. It is for this precise reason that in Marx the whole analysis of the process of reproduction leads to the class struggle (p.602).

The "it is for this precise reason" is rich, as if the class struggle meant for Marx only the struggle over wage claims and hours of work.

Let us consider a little closer the basis of this collapse. On what is the necessary growth of constant capital by 10 per cent each time based? In the quotation given above it was stated that technical progress (the rate of population growth being given) prescribes a given annual growth of constant capital. So it could then be said, without the detour of the production schema: when the rate of profit becomes less than the rate of growth demanded by technical progress then capitalism must break down. Leaving aside the fact that this has nothing to do with Marx, what is this growth of capital demanded by technology? Technical improvements are introduced, in the context of mutual competition, in order to obtain an extra profit (relative surplus value); the introduction of technical improvements is however limited by the financial resources available. And everybody knows that dozens of inventions and technical improvements are not introduced and are often deliberately suppressed by the entrepreneurs so as not to devalue the existing technical apparatus. The necessity of technical progress does not act as an external force; it works through men, and for them necessity is not valid beyond possibility.

But let us admit that this is correct and that, as a result of technical progress, constant capital has to have a varying proportion, as in the schema: in the 30th year 3170:412, in the 34th year 4641:500, in the 35th year 5106:525, and in the 36th, 5616:551. In the 35th year the surplus value is only 525,000 and is not enough for 510,000 to be added to constant capital and 26,000 to variable capital. Grossmann lets the constant capital grow by 510,000 and retains only 15,000 as the increase in variable capital - 11,000 too little! He says of this:

11,509 workers (out of 551,000) remain unemployed; the reserve army begins to form. And because the whole of the working population does not enter the process of production, the whole amount of extra constant capital (510,563) is not needed for the purchase of means of production. If a population of 551,584 uses a constant capital of 5,616,200, then a population of 540,075 would use a constant capital of only 5,499,015. There, therefore, remains an excess capital of 117,185 without an investment outlet. Thus the schema shows a perfect example of the situation Marx had in mind when he gave the corresponding part of the third volume of Capital the title "Excess Capital and Excess Population" (p. 116).

Grossmann has clearly not noticed that these 11,000 become unemployed only because, in a complete arbitrary fashion and without giving any reason, he makes the variable capital bear the whole deficit, while letting the constant capital calmly grow by 10 percent as if nothing was wrong; but when he realises that there are no workers for all these machines, or more correctly that there is no money to pay their wages, he prefers not to install them and so has to let the capital lie unused. It is only through this mistake that he arrives at a "perfect example" of a phenomenon which appears during ordinary capitalist crises. In fact the entrepreneurs can only expand their production to the extent that their capital is enough for both machinery and wages combined. If the total surplus value is too small, this will be divided, in accordance with the assumed technical constraint, proportionately between the elements of capital; the calculation shows that of the 525,319 surplus value, 500,409 must be added to constant capital and 24,910 to variable capital in order to arrive at the correct proportion corresponding to technical progress. Not 11,000 but 1,326 workers are set free and there is no question of excess capital. If the schemes is continued in this correct way, instead of a catastrophic eruption there is an extremely slow increase in the number of workers laid off.

But how can someone attribute this alleged collapse to Marx and produce, chapter after chapter, dozens of quotations from Marx? All these quotations in fact relate to economic crises, to the alternating cycle of prosperity and depression. While the schema has to serve to show a predetermined final economic collapse after 35 years, we read two pages further on of "the Marxian theory of the economic cycle expounded here" (p. 123).

Grossmann is only able to give the impression that he is presenting a theory of Marx's by continually scattering in this way throughout his own statements comments which Marx made on periodic crises. But nothing at all is to be found in Marx about a final collapse in line with Grossmann's schema. It is true that Grossmann quotes a couple of passages which do not deal with crises. Thus he writes on page 263:

It appears that "capitalist production meets in the development of its productive forces a barrier..." (Marx, Capital, Vol. III, p. 237).

But the main thing about their (i.e., Ricardo and other economists) horror of the falling rate of profit is the feeling that capitalist production meets in the development of its productive forces a barrier...

This process would soon bring about the collapse of capitalist production if it were not for counteracting tendencies, which have continuous decentralising effect alongside the centripetal one (Capital, Vol. II, p. 241).

It is this same severance of the conditions of production, on the one hand, from the producers, on the other, that forms the conception of capital. It begins with primitive accumulation, appears as a permanent process in the accumulation and concentration of capital, and expresses itself finally as centralisation of existing capitals in a few hands and a deprivation of many of their capital (to which expropriation is now changed).

It is clear that the collapse which thus results is, as so often in Marx, the ending of capitalism by socialism. So there is nothing in the quotations from Marx: a final economic catastrophe can be as little read from them as it can be concluded from the reproduction schema. But can the schema serve to analyse and explain periodic crises? Grossmann seeks to join the two together: "The Marxian theory of collapse is at the same time a theory of crises" - so reads the beginning of Chapter 8 (p. 137). But as proof he only provides a diagram (p. 141) in which a steeply rising `accumulation line' is divided after 35 years; but here a crisis occurs every 5 or 7 years when in the schema everything is going smoothly. If a more rapid collapse is desired it would be obtained if the annual rate of growth of constant capital was not 10 per cent but much greater. In the ascendant period of the economic cycle there is in fact a much more rapid growth of capital; the volume of production increases by leaps and bounds; but this growth has nothing at all to do with technical progress. Indeed, in these periods variable capital too increases rapidly by leaps. But why there must be a collapse after 5 or 7 years remains obscure. In other words, the real causes which produce the rapid rise and then the collapse of economic activity are of a quite different nature from what is set out in Grossmann's reproduction schema.

Marx speaks of over-accumulation precipitating a crisis, of there being too much accumulated surplus value which is not invested and which depresses profits. But Grossmann's collapse comes about through there being too little accumulated surplus value.

The simultaneous surplus of unused capital and unemployed workers is a typical feature of crises; Grossmann's schema leads to a lack of sufficient capital, which he can only transform into a surplus by committing the mistake mentioned above. So Grossmann's schema cannot demonstrate a final collapse, nor does it correspond to the real phenomena of collapse, crises.

It can also be added that his schema, in conformity with its origin, suffers from the same defect as Bauer's: the real, impetuous pushing forward of capitalism over the world which brings more and more peoples under its domination is here represented by a calm and regular population growth of 5 per cent a year, as if capitalism was confined in a closed national economy.