Some Key Questions for Luxemburg’s Theory of Accumulation
The Author’s Preface
In recent years I have become more and more aware of the failure of Luxemburgism to explain this latest period of decadence since the 1990s and I turned to re-reading ‘The Accumulation of Capital’ in more depth in an effort to find what Luxemburg was actually saying about precapitalist markets.
On first reading, I could only see what appeared as an enormous jump in logic in Chapters 26 and 27, where she argues that because capital grew up in an environment of precapitalist markets, capitalism must therefore depend on them for accumulation. This is clearly an inadequate explanation and it led me to keep investigating more deeply as to why she should have said this. I do think I have found various elements that lay the foundation for her conclusion, but I have never found her arguments to be persuasive. Indeed I would say they completely misunderstand how capitalism works and even contradict her earlier writings.
Over the recent period, I have also been engaged in various discussions on the ICC forum to try to clarify our understanding of issues but have found comrades for the most part to be unaware of the details of her theory and unwilling to respond in any depth to the empirical facts I have raised about population and economic growth (i.e. facts similar to C.Mcl.’s text Has Capitalism entered its Decadence since 1914?). Also various texts have been uploaded on https://markhayes9.wixsite.com/website
This current text is a brief set of questions for Luxemburgists based on my reading and on the counter arguments of her supporters whose defence of her theory appears to me to be superficial.
Link, 4. December 2020
Problems for the modern day supporters of Luxemburg’s theory of total dependence on pre-capitalist markets.
Luxemburg considers Marx’s diagram of total social capital to be invalid. In ‘Accumulation of Capital’ (1) she spends many chapters investigating Marx’s diagram of c+v+s=tc and explaining how the two departments of capital and subsistence manufacture function, only to conclude that they don’t explain enhanced reproduction. [the formula is explained in the glossary below]
She believes that Marx’s diagram of accumulation works only for simple reproduction (i.e. when capital only reproduces itself and doesn’t grow or accumulate new capital), but not for enhanced reproduction when capital is actually accumulating.
This is not something that Luxemburgists pay much attention too but just why does she consider Marx’s key abstraction about how capitalism works to be so wrong that she concludes that capital cannot accumulation on its own, that it requires external demand to enable it to grow?
The abstraction c+v+s=tc is a simplified way of looking at how value generation works in capitalism and is needed because the world is just so complicated that starting with the detail makes no sense. So it strips out issues of money generation, social wage, unproductive labour and manufacturing, waste expenditure, errors in demand for subsistence commodities, raw materials, component manufacture and fixed asset manufacture, unsold products and unrealised capital values in general, unprofitable and over-profitable businesses, foreign trade, supply and demand variations, and I dare say many other facets of real world activity. It really is just the manufacturing process and the relations of production stripped to the bare minimum.
However, this simplification does not mean that the formula does not take into account all these elements, they are just not necessary to understand the key features of value creation and capital accumulation. The abstraction assumes demand creation and supply processes function in the markets created by capital as well as trade with the converting pre-capitalist markets too.
This theorisation of total social capital is based on the idea that the commodities produced in a given cycle of accumulation are determined at the start of that cycle and [that] the aggregate capitalist cannot determine the commodities that can be used to advance production until the end of the cycle. This leads to her seeing not just a disparity in the content of available capital commodities to that which is actually required, but to the total absence of any usable capital commodities. For Luxemburg this means Marx’s theory of enhanced reproduction doesn’t work at all.
Problem 2. Why does Luxemburg suggest that, in a world solely consisting of workers and capitalists, anything that capitalists purchase can only be for the purpose of their own subsistence?
This is part of the reason she argues that the demand for capital assets that are to be used to enhance production, i.e. to increase it in size or to adopt new technologies, must come from pre-capitalist markets. However, here she ignores the quite simple bit of logic that, whilst capitalists do clearly purchase means of subsistence for themselves, their businesses do not. Their businesses purchase raw materials, components, manufacturing equipment, premises and labour power. There is a distinction here that Luxemburg does not recognise.
It is from this point that her theory about the importance of pre-capitalist markets starts to emerge. The following quote presents a clear explanation of her conclusion that neither capitalists nor workers could provide the demand that would enable the capitalisation of new capital assets.
“All this time, it appears, Marx has been tackling the problem from a wrong approach. No intelligent purpose can be served by asking for the source of the money needed to realise the surplus value. The question is rather where the demand can arise – to find an effective demand for the surplus value. If the problem had been put in this way at the start, no such long-winded detours would have been needed to show whether it can be solved or not. On the basis of simple reproduction, the matter is easy enough: since all surplus value is consumed by the capitalists, they themselves are the buyers and provide the full demand for the social surplus value, and by the same token they must also have the requisite cash in hand for circulation of the surplus value. But on this showing it is quite evident that under conditions of accumulation, i.e. of capitalisation of part of the surplus value, it cannot, ex hypothesi, be the capitalists themselves who buy the entire surplus value, that they cannot possibly realise it. True, if the capitalised surplus value is to be realised at all, money must be forthcoming in adequate quantities for its realisation. But it is quite impossible that this money should come from the purse of the capitalist class itself. Just because accumulation is postulated, the capitalists cannot buy their surplus value themselves, even though they might, in abstracto, have the money to do so. But who else could provide the demand for the commodities incorporating the capitalised surplus value?” (‘Accumulation of Capital’, Chapter 9) (2)
Problem 3. Why are the commodities that are required to enhance production any different from the commodities required to replace worn capital assets and subsistence requirements?
This issue is an extension of her idea that capitalists do not purchase anything but means of subsistence, but it also demonstrates further confusions. According to Luxemburg, simple reproduction works by simply reproducing what already exists, but enhanced reproduction cannot work as we have seen. Therefore the difference between the two must be the problem, i.e. that part of total social capital that is to be used to enhance levels of accumulation, i.e. additional manufacturing machinery to what already exists and any new high technological machinery.
The explanation of this key idea in her theory lies in Chapter 4 of ‘Accumulation of Capital’ where she is discussing the differences between simple reproduction and enhanced reproduction.
“Here we come up against palpable differences between the individual capitalist and the total capitalist. The manner in which the former always reproduces his constant and variable capital as well as his surplus value is such that all three parts are contained in the same material form within his homogeneous product, that this material form, moreover, is completely irrelevant and may have different qualities in the case of each individual capitalist. The ‘total capitalist’, for his part, reproduces every component of the value of his annual product in a different material form, c as means of production, v as provisions for the workers, and s as provisions for the capitalist. In the case of the reproduction of individual capitals, there is no discrepancy between relations of value and material points of view. Besides, it is quite clear that individual capital may concentrate on aspects of value, accepting material conditions as a law from heaven, as self-evident phenomena of commodity-exchange, whereas the ‘total capitalist’ has to reckon with material points of view. If the total c of society were not reproduced annually in the form of an equal amount of means of production, every individual capitalist would be doomed to search the commodity market in vain with his c realised in cash, unable to find the requisite materials for his individual reproduction. From the point of view of reproducing the total capital, the formula c + v + s is inadequate.” (‘Accumulation of Capital’, Chapter 4) (3)
In a nutshell, her contention is that c+v+s is valid for individual capitalists in both value terms and material product content but, according to the above, it cannot be correct in terms of the material content of total stock and therefore accumulation is not possible.
However, this leads her to the confusing position that the realisation of replacement parts and maintenance of existing machinery must be possible within capitalism (this in itself appears to contradict her view that capitalists can only purchase means of subsistence), but the enhancement of existing machinery is impossible. The latter, she says, can only be realised in pre-capitalist markets!! But if capitalists can only purchase subsistence commodities, this would not include the maintenance items and raw materials/components that she now says is possible!
Problem 4. Aren’t the markets for all commodities estimated in advance of production by capitalist enterprises?
In the ‘Anti-Critique’ (4) we gain a further justification by Luxemburg as to why capitalists cannot purchase enhanced manufacturing equipment.
She quite explicitly states in ‘Anti Critique’: “The total capitalist, like each individual capitalist, cannot plan to enlarge production until he has exchanged his quantity of commodities.” (‘Anti-Critique’, Chapter 3) (5)
She therefore treats the material content of the total stock at the end of any production cycle to be fixed at the start of that cycle – and remember does not include anything other than commodities to be sold as subsistence. This is a thoroughly static view of capitalist product which is not at all valid.
All capitalist firms make an assessment of what to produce and at what price to sell it, either on the basis of pre-existing contracts (for large projects) or their assessment of market requirements (for consumer goods). To access either type of market a firm must exist beforehand and have committed itself to investment in full manufacturing resources. Planning by capitalist firms is therefore their assessment of a market, it is not a planned economy with a planned market. It is the production of commodities for a market and the market is anarchy, it is not controlled or planned.
So despite what Luxemburg says here however it is the anarchy of competition and the markets that cause the problems for their realisation. All commodities destined for workers’ subsistence, capitalists’ subsistence and businesses are produced by the same relations of production, so why should there be a distinction in how they are planned for, manufactured and circulated? In an unplanned economy such as capitalism where the market is in charge it is just not possible that the demand for commodities can be identified in advance.
Problem 5. How is it possible for all individual capitalists to accumulate but not for the aggregate capitalist at the level of total social capital?
Luxemburg’s assertion here rests entirely on her view that the material content of total social stock will not allow enhanced reproduction. Not only is this questionable, but she appears to contradict herself in this last quote, which suggests that even individual capitalists cannot accumulate, even if they had the money to do so!
“Since the accumulation of capital becomes impossible in all points without non-capitalist surroundings, we cannot gain a true picture of it by assuming the exclusive and absolute domination of the capitalist mode of production.” (‘Accumulation of Capital’, Chapter 26) (6)
This leads Luxemburg to the most famous element in her theory. She has decided capitalism cannot capitalise itself, so ‘who else can’ she asks. Capitalism is growing within an environment of pre-capitalist markets, so for Luxemburg it clearly must be these pre-capitalist markets that must demand and purchase the enhanced technology, it is these markets that must provide the investment in enhanced capital equipment.
Now it must be accepted that these markets can facilitate accumulation in that they open up access to new resources and labour and new areas for the expansion of capitalism, so she is quite correct to point out that capitalism emerged and grew in an environment of pre-capitalist markets. However, Luxemburg asserts that accumulation becomes impossible without them and that only these pre-capitalist markets can capitalise those commodities intended to enhance production.
The consequence is that she ends up embracing the paradox that all individual capitalists can accumulate but, at the level of the total social, the aggregate capitalist cannot.
Problem 6. Is it empirically possible to justify the idea that pre-capitalist markets can provide a market for enhanced production equipment?
Luxemburg suggests she is relating the accumulation issue to the real world, but in this real world can pre-capitalist formations actually purchase and use the very latest technology and the machinery that individual firms require to expand their production base?
Can it really be said [that] feudal wealth ever purchased trains, steam engines, manufacturing machinery? This process was actually undertaken capitalists supported by bank loans and private charter companies that were set up in the colonising countries to operate in the colonies and indeed take control of them.
Today the growth of the capitalist economy and for example the development of countries in Asia must be the result and accumulation created by conversion of non-capitalist markets into capitalist [markets]. However, what this means in the real world according to Luxemburg’s theory, is that this is happening because those non-capitalist markets, which today are no more than poor peasant economies, are purchasing all the incredibly hightech computing systems, satellites, high speed trains, airplanes, bio-genetics, etc. etc. that capital is able to produce today!
And not just for themselves either. If Luxemburg’s theory is believed then these non-capitalist markets must be providing the demand for the whole stock of this enhanced technology equipment.
Link, 27 November 2020
c+v+s=tc is Marx’s diagram of the reproduction of capital, where:
c = constant capital (at the start of the production cycle)
v = variable capital (used during the cycle)
s = surplus value (created by the cycle)
tc = total capital (at the end of the cycle).
1 R. Luxemburg (1913): The Accumulation of Capital. Routledge & Kegan Paul, 1971, Section 2: Historical Exposition of the Problem. See also: https://www.marxists.org/archive/luxemburg/1913/accumulation-capital/index.htm.
2 Ibidem, Chapter 9: The Difficulty Viewed From the Angle of the Process of Circulation. p. 164-165.
3 Ibidem, Chapter 4: Marx’s Scheme of Simple Reproduction. p.82.
4 R. Luxemburg (1915): An Anti Critique (The Accumulation of Capital, or What the Epigones Have Made of Marx’s Theory); https://www.marxists.org/archive/luxemburg/1915/anti-critique/index.htm.
5 Ibidem, Chapter 3: Bauer’s General Criticisms.
6 R. Luxemburg (1913): The Accumulation of Capital, Chapter 26: The Reproduction of Capital and its Social Setting. p.365.