The Permanent Crisis

PaulMattick.1934ThePermanentCrisis-HenrykGrossman’sInterpretationofMarx’sTheoryOfCapitalistAccumulationSource:TheCouncilCommunistArchive-http://web.archive.org/web/20090221055640/www.kurasje.org;Written:byPaulMattick,publishedinInternationalCouncilCorrespondenceVol.1,no.2,November1934,pp1-20.Thee-versionofthistextwasmadebyKavoshKavoshgarforKurasje;Transcribed:byStevePalmer.I.AccordingtoMarx,thedevelopmentoftheproductiveforcesofsocietyisthemotivepowerofhistoricaldevelopment.Inacquiringnewproductiveforcesmenchangetheirmodeofproduction,andinchangingtheirmodeofproduction,theirmannerofgainingaliving,theychangealltheirsocialrelations.Thetransformationofthespinningwheel,thehand-loomandblacksmithssledge,intotheself-tendingmule,thepower-loomandthesteamhammerwasnotonlyaccompaniedbyachangeofthesmallindividualshopsofthecraftsmenintohugeindustrialplantsemployingthousandsofworkers,buttherealsocamewithitthesocialoverturnfromfeudalismtocapitalism;thatis,notmerelyamaterialrevolution,butaculturalrevolutionaswell.Capitalismasaneconomicsystemhadthehistoricalmissionofdevelopingtheproductiveforcesofsocietytoamuchgreaterextentthanwaspossibleunderanyprevioussystem.Themotiveforceinthedevelopmentoftheproductiveforcesincapitalismistheraceforprofit.Butforthatveryreasonthisprocessofdevelopmentcancontinueonlyaslongasitisprofitable.Fromthispointofviewcapitalbecomesabarriertothecontinuousdevelopmentoftheproductiveforcesassoonasthatdevelopmentcomesintoconflictwiththenecessityforprofit.“Thenthemonopolyofcapitalbecomesafetteruponthemodeofproductionwhichhassprungupandflourishedalongwith,andunderit.Centralisationofthemeansofproductionandsocializationoflaboratlastreachapointwheretheybecomeincompatiblewiththeircapitalistintegument”.Marxalwaysconsiderstheeconomiclawsofmotionfromtwopointsofview:first,as“aprocessofnaturalhistory”;second,initsspecific,socialform.Thedevelopmentofproductiveforceswentonineverysocialsystem,aprocessconsistingofaneverincreasingproductivityoflaborduetobetterworkingtoolsandmethods.Theproductiveprocessundercapitalism,inadditiontoproducingthenecessitiesoflife,alsoproducesvalueandsurplusvalue,anditisonlyduetothisfactthatcapitalismhasbeenabletoacceleratethedevelopmentoftheproductiveforcessotremendously.Theyarenotonlymachines,raw-materialandlaborpower,butalsocapital.Thedevelopmentoftheinstrumentsofproductionmeanstheexpandingofproductionandreproductionofcapital,andthisisonlypossiblewhensurplusvalueorprofitistheresultofthe1/19ThePermanentCrisisbyPaulMattick19342017/8/25https://www.marxists.org/archive/mattick-paul/1934/permanent-crisis.htmproductiveprocessofcapital.Byanalysisoftheprocessofproducingsurplusvalue,Marxfindsthetendencyofaconflictbetweenthematerialproductiveforcesandtheircapitalistintegument.Wheninsufficientsurplusvalueresultsfromproduction,ifcapitalcannotbe“utilised”,thereisnopossibilityofcontinuingthedevelopmentoftheproductiveforces.Thecapitalisticformsmustburstasundertomakeplaceforahigher,moreadvanced,economicandsocialsystem.Inthecapitalistsystemwagelaborisnecessaryfortheproductionofsurplusvalue.Inbuyinglaborpower,thecapitalistacquirestherighttouseitforhisownbenefit.Byhislabor,theworkerisabletoproduceagreatervaluethanheconsumes,ie–heproducesmorevaluethanthecapitalistpayshimintheformofwages.Sincethecapitalistbuyslabor-poweratitsexchangevalue,andhasfullcontrolofitsusevalue,theresultisthecreationofsurplusvalueoutofwhichhetakesapartforadditionalcapital,foraccumulation,paysinteresttothebankerandrenttothelandlord,allowsthemerchanthiscommercialprofit,andretainstherestforhisownconsumption.Allcommoditieshaveincommonthequalityofbeingproductsoflabor;theyaremeasuredandexchangedinproportiontothesociallynecessarylabortimeincorporatedinthem;thisincludesalsothecommoditylabor-power.Thedevelopmentoftheproductiveforcesmeansincreasedproductivityoflabor,andincreasedproductivitymeanslesslaborincorporatedineachcommodity,orlessvalue,andconsequentlylesssurplusvalue.Thisdecreaseinthevalueofonesinglecommoditycanonlybecompensatedbytheincreaseofthequantitiesofcommoditiesproduced,whichmeansanincreaseintheexploitationoflabor.Thisisdonebytwomainmethods:bylengtheningtheworkingday(“absolutesurplusvalue”),orbyshorteningthelabortimenecessaryforreproducingthewagesoftheworkers(“relativesurplusvalue”).Ifthelengtheningoftheworkingdayisimpossible,thenthereonlyremainstheshorteningofthenecessarylabortimewhichcanonlybedonebydecreasingthevalueoflabor-power.Thedecreaseinthevalueofcommoditiesistheonlymeansofreducingthevalueoflaborpower,butthisinitsturncanonlybetheresultofincreasedproductivity.Thisprocessis,atthesametime,anacceleratorforcingtechnicaldevelopmentataneverincreasingtempotowardsmassproductionandgiganticandcostlymachinery,concentratedinhugeindustrialplants,eliminatingindividualandsmallcapitalistsinfavorofbigcapitalistsandcorporations.Sincewagelaboristhesourceofhisprofit,thecapitalistshouldbeinterestedinexploitingasmanyworkersaspossible.Themoreworkers,themoresurpluslaborandvalue,themoreprofit.Butitisneverthelessafactthatfromtheverybeginningofthecapitalistepoch,thenumberofworkersemployedrelativetothecapitalemployed,hasbeenfalling.Eveniftheirnumberhasabsolutelyincreasedforaperiod,theyhaveincreasedmoreslowlythancapitalhasaccumulated.Todaythenumberofworkersemployedhasfallen,notonlyrelatively,butabsolutely.(Since1918,thenumberofthoseemployedinAmericanindustryhascontinuouslydecreasedthoughproductionincreaseduntil1929.)Increasedproductivitycoupledwiththeprocessofconcentrationofcapitalthusresultsinaconstantlygrowingmassofcommoditiesproducedbyfewerandfewerworkers-increasedproduction,inincreasedunemployment.Thisfact,inthefaceofthecapitalists’urgentneedformoreextensiveexploitation,indicatesthelimitsofcapitalistproduction.Themoreexploitationisintensified,thefastertheselimitsarereached.“Thesamecircumstanceswhichhaveincreasedtheproductivepoweroflabor,augmentedthemassofproducedcommodities,expandedthemarkets,acceleratedtheaccumulationofcapital,bothasconcernsitsmassandvalue,andloweredtherateofprofit,thesesamecircumstanceshavealsocreatedarelativeover-populationandcontinuetocreateitallthetime,anover-populationof2/19ThePermanentCrisisbyPaulMattick19342017/8/25https://www.marxists.org/archive/mattick-paul/1934/permanent-crisis.htmlaborerswhoarenotemployedbythesurpluscapitalonaccountofthelowdegreeofexploitationatwhichtheymightbeemployed,oratleastonaccountofthelowrateofprofitwhichtheywouldyieldwiththegivenrateofexploitation.”Thelawofvalueis,accordingtoMarx,theregulatoroftheproductionofcommoditiesanddeterminesinwhatproportiontheworkofsocietyisdistributed,butthisonlyholdsgoodforsocietyasawhole,notforindividualcapitalistunits.Inreality,thelawofvalueisonlyenforcedthroughthecompetitionofindividualenterprises;actualexchangeofcommoditiesdoesnottakeplaceaccordingtovalue,butaccordingtopriceofproduction.Ifonecapitalistsellsabovevalue,anothercapitalistsellsbelow.Competition,whichresultsintheestablishmentoftheaveragerateofprofit,alsoestablishedthelawofvalueasthefinalandgenerallawwhichunderliesthesumtotalofindividualtransactionsatthepricesofproduction.Withoutthis,therateofprofitwoulddifferfromonebranchofproductiontoanotheraccordingtotherateofsurplusvalue,periodofcapitalturnover,andtheorganiccompositionofcapital.Thegreatertherateofsurplusvalue,thehighertherateofprofit.(Therateofsurplusvalueorexploitationisthesurplusvaluedividedbythecapitalinvestedinwages–thevariablecapital.Therateofprofitisthesurplusvaluedividedbythetotalcapitalincludingconstantcapital:-meansofproduction,andvariablecapital.)Thequickertheturnoverofcapital–iethequickerthecapitalistgetshiscapitaloutlayplussurplusvalueback–thehighertherateofprofit,andvice-versa.Theratiobetweenthemeansofproductionandlaborpower,expressedinvalueformasconstantandvariablecapital,wecalltheorganiccompositionofcapital.Thehighertheorganiccomposition,thelowertherateofprofit.Asnotonlytherateofprofitforindividualcapitals,butalsotheaveragerateofprofitcontinuouslysinksonaccountoftheriseintheorganiccompositionofcapital,smallcapitalswouldbedestroyediftheywereunabletoincreasetheircapitalsufficiently.Theexistenceofthecapitalistdependsonacontinuousincreaseofhiscapitalbyloweringproductioncostsbelownormal.Hestrivestogainanextraprofitbyproducingandsellinghisproductsovertheirindividualbutbelowtheirsocialvalue.Eachcapitalisthasofnecessitythesamedesireandsoeachcapitalistmustaccumulate.Ifhestopsre-investingpartofhissurplusvalueinhisenterprise,herunstheriskofhiscapitalbecomingvalueless,ifitstechnicalformisfallingbehindthegeneraldevelopmentoftheproductiveforces.Thisfactresultsinagainraisingtheorganiccompositionandfurtherloweringtherateofprofit,andtherebyhastensthetempoofdevelopmentbystimulatingthesearchforextraprofit.Toresistwouldmeaneconomicsuicideforthecapitalist.Tounderstandtheactionofthelawofvalueandaccumulation,wemustfirstdisregardtheseindividualandexternalmovements,andconsideraccumulationfromthepointofviewoftotalcapital,sincethetotalsocialcapitalvaluesandtotalpricesareidentical.“Themostimportantfactorinthisinquiryisthecompositionofcapitalandthechangesitundergoesinthecourseoftheprocessofaccumulation”.Inthecapitalistmodeofproduction,andinthatalone,isthedevelopmentoftheproductivepowernotonlyexpressedasagrowthofmeansofproductioninordertohavemoreresultswithlesslabor,(asitisexpressedinalleconomicsystems)butasariseintheorganiccompositionofcapital,moreconstantcapital,lessvariablecapitalandaconsequentfallingrateofprofit.“Afallintherateofprofitandahasteningofaccumulationareinsofaronly3/19ThePermanentCrisisbyPaulMattick19342017/8/25https://www.marxists.org/archive/mattick-paul/1934/permanent-crisis.htmdifferentexpressionsofthesameprocessasbothofthemindicatethedevelopmentoftheproductivepower.Accumulationinitsturnhastensthefalloftherateofprofit,inasmuchasitimpliestheconcentrationoflaboronalargescaleandtherebyahighercompositionofcapital”.Thefallintherateofprofitisatthesametimeaccompaniedbyanincreaseinthemassofprofitaslongascapitalaccumulatesfasterthantherateofprofitfalls.Thesinkingoftherateofprofitandthegrowthofthemassofprofitarethereforebothcausedbycapitalistaccumulation.Atthesametimethesinkingrateofprofitactsasanindextotherelativefallofthemassofprofit.Whentheaccumulationofcapitalreachesacertainpoint,themassofprofitwillfallnotonlyrelativelytothetotalcapitalinvested,butalsoabsolutely;alargersocialcapitalwillbringanabsolutelysmallerprofit.Butthispointonlyappearsattheendofacertainperiodofaccumulation.Uptothatpoint,“thesamedevelopmentofsocialproductivityoflaborexpressesitselfinthecourseofcapitalistproductionontheonehandinatendencytoaprogressivefalloftherateofprofit,andontheotherhandinaprogressiveincreaseoftheabsolutemassoftheappropriatedsurplusvalue,orprofit;sothatinthewhole,arelativedecreaseofvariablecapitalandprofitisaccompaniedbyanabsoluteincreaseofboth.”Thisisthecharacteristicexpressionoftheprogressivedevelopmentoftheproductivepoweroflaborunderthecapitalistmodeofproduction.II.AccumulationandCrisisThefallintherateofprofithasthrownbourgeoiseconomyoutofbalance.ForMarx“thefallingrateofprofitturnsintoanantagonismofthismodeofproductionatacertainpointandrequiresforitsdefeatperiodicalcrisis.”Accumulationandahigherorganiccompositionofcapitalareidentical.Withitgoesthefalloftherateofprofit.Withanorganiccomposition(1:1)say30constantcapitaland30variablecapital,andarateofexploitationof100%,therateofprofitwillbe50%.Withanorganiccomposition(5:1)say250constantcapitaland50variablecapital,andthesamerateofexploitation,therateofprofitwillbe16.6%.(Asstatedbefore,therateofsurplusvalue(here100%)isdeterminedbytheproportionbetweenthenecessaryandthesurpluslabortime.Buttherateofprofitissurplusvaluedividedbythetotalcapital;ie–constantandvariableboth.)Intheaboveexample,bothconstantandvariablecapitalisincreased.Notonlyisthescaleofproductionexpanded,butthenumberofworkersemployedincreased.Webeganwithaloworganiccomposition(1:1)andendwithahigh(5:1).Thisisbothacauseandexpressionoftheincreasedproductivityoflaborthatalsomustbeexpressedinanincreasedrateofsurplusvalue.Wehadarateofsurplusvalueof100%,buttheincreasedproductivityshortensthenecessarylabortimeandincreasestherateofsurplusvalue,whichcounteractsthefalloftherateofprofit.Iftherateofsurplusvalueisincreasedfrom100%to300%,thenevenahighorganiccompositionofcapital(5:1)wouldyieldthesamerateofprofit,thatis50%,astheloworganiccomposition(1:1)witharateofsurplusvalueof100%.Besidesthis,throughtheincreasedproductivityoflabor,therateofsurplusvaluemayalsoriseduetoothercausesandtherebycompensatefortheincreaseintheorganiccomposition.Weshalllaterinvestigatethis,butinwhateverwaythismaybeaccomplished,thefactisthatthefallingrateofprofitisaccompaniedbyariseinthemassofprofitthatcounteractsthedangerimpliedinafallingrate.Butthisgrowthofcapitalinturnimpliesafurtherfallintherateofprofit.Thusthesinkingrateofprofitcreatesfurtherattemptstoraisethesurplusvalueasisactuallythecase.4/19ThePermanentCrisisbyPaulMattick19342017/8/25https://www.marxists.org/archive/mattick-paul/1934/permanent-crisis.htmSinceatfirstthefallintherateofprofitisaccompaniedbyanincreaseinthemassofprofit,itisdifficulttounderstandhowthecollapseofcapitalismwouldresultfromthedeclineintherateofprofit,andwhatrelationthereisbetweenperiodiccrisisandthefallingrateofprofit.Anexplanationofthisconnectionhasoftenbeenattempted,butallofthoseattemptshavefailedbecauseineachcasetheexplanationwasbasedon,andlimitedto,theinvestigationofthefallingrateofprofitalone.HenrykGrossmanwasthefirsttopointoutthatthecrisisandthefinalcollapsemustbeexplainednotonlybythefallingrateofprofit,themereindexofprofit,butbytheactualmassofprofitunderlyingit.AccordingtoMarx,capitalistaccumulationisdeterminednotonlybytherateofprofit,butalsobythemassofprofit.Inotherwords,thesurplusvaluemayabsolutelyincrease,butitwillneverthelessbeinsufficientfortheneedsofaccumulationbecausetherisingorganiccompositionconstantlyswallowsanevergreaterpartofsurplusvalue.Capitalaccumulationinitiatedaseriesofgreatboomsinterruptedbyperiodiccrises.Astherateofaccumulationgrew,theintensityofthecrisesgrewwithit.Thecapitalistprocessofreproductionrepeatsitself,notintheformofacircle,butasaspiral,narrowingtoapoint.Theproductionofvaluesmust,duetoitsinherentcontradictions,leadtoitsownnegation;butonlytheaccumulationofthesecontradictionscantransformthemintosomethingqualitativelydifferent:intorevolution.Thesamelawswhichhadatfirstconstitutedthemotiveforceofarapiddevelopmentofcapitalism,nowbecomethedrivingforceofcapitalistcollapse.Butthiscollapsedoesnotdevelopevenlyandinastraightdownwardline.Itiscontinuouslyinterruptedascapitalistrealitymodifiesthegeneralabstractlawofcapitalistaccumulation.Marxelaboratednospecialtheoryofcrises,buthisanalysisofthelawsofcapitalistreproduction,oraccumulation,wasalsoatheoryofcrisis.Letusillustratewithanabstracttablethelawofcapitalistreproduction.Inorderthataccumulationmaybepossible,thesurplusvaluemustbedividedintothreeparts;onetobeinvestedinadditionalconstantcapital,oneinadditionalvariablecapital,andtheremaindertobeconsumedbythecapitalistclassasindividuals.Duringtheriseofcapitalism,variablecapitalgrowsaswellasconstantcapital,onlymoreslowly.Webegin,inourtablebelow,withanorganiccompositionof2:1.Theconstantcapitalgrowsatayearlyrateof10%,thevariableat5%.Therateofsurplusvalueremains100%.(ConstantcapitalwecallC,variableV.TheconsumptionfundofthecapitalistsisR.ACissurplusvalueavailableforaccumulationofconstantcapital;AVforvariable.ThevalueoftheyearlyproductwecallVYP;thepercentageofsurplusvalueconsumedbythecapitalistswecallR%;therateforaccumulationA%,therateofprofitP%.YrCVRACAVVYPR%A%P%1200,000100,00075,00020,0005,000400,00075.0025.0033.32220,000105,00077,75022,0005,250430,00074.0525.9532.63242,000110,25080,53924,2005,511462,50073.0426.9631.34266,000115,76283,37426,6005,788497,52472.0227.9830.3Weseehowinthistableaccumulationincreasesinspiteofafallingrateofprofit.Accumulationpaysforthecapitalists,forwhiletheirrevenuebecomessmallerrelativetothesurplusvalueasa5/19ThePermanentCrisisbyPaulMattick19342017/8/25https://www.marxists.org/archive/mattick-paul/1934/permanent-crisis.htmwhole,itincreasesabsolutely.Duringthefirstyearthecapitalistscommand75,000asrevenue(R);duringthefourthyear,83,374.Thistableisafictionthatshouldinnowisebemistakenforreality.Aprogressivelyhigherorganiccompositionaccompaniedbyaconstantrateofexploitationisanimpossibility,nayanabsurdity.Thetableisonlymeanttoillustratethetendencyofaccumulationwithnodisturbingandcomplicatingtendencies.Evenwithaconstantrateofsurplusvalue,accumulationcantakeplacesomuchfasterwithanincreasedrateofexploitation.Thistablealsoreflectsaccumulationonlyinitsvalue-form,notexpressedinthequantityofusevalues;toexpressitthus,wouldcausemanymodifications.Thedevaluationofcapitalnecessarilyconnectedwithaccumulationherehasbeendisregarded.Ifwe,likeHenryGrossman,extendthistabletothe35thyear,weshallbeabletoshowifnotactualcapitalistaccumulation,atleastits“innerlaw”.Buttoarriveatcapitalistreality,wemustinadditiontobasingourselvesontheinnerlawofcapitalistaccumulationalsotakeintoaccounttheelementsdisregardedintheillustratingtable.Itmustbeborneinmind,however,thattheelementsdisregardedinthetableonlydeterminethetempooftheprocessofaccumulation,eitherhasteningorslowingitdown;butineithercasetheprocessremainsessentiallythesame.Letusfollowthetable:YrCVRACAVVYPR%A%P%5292,600121,50086,21329,2606,077535,70070.9329.0729.36321,860127,62789,06032,1866,381577,11469.7030.3028.4201,222,252252961117,832122,22512,6341,727,63446.6353.3717.1211,344,477265325117,612134,44713,2661,875,12744.3355.6716.4344,641,489500,30411,141464,14825,0155,642,0970.4599.559.7355,105,637525,3190510,56314,7566,156,2750104.619.3Thetableshowsthatthesameforceswhichatfirstmadetheriseofcapitalismpossibleatacertainphaseofaccumulationleadtoover-accumulationanditsconsequences.Theconstantcapitalthatinthefirstyear(firsttable)was50%oftheyear’sproduction,demandsinthe35thyear(secondtable)82.9%.Therevenue(R)thatuntilthe20thyearonlyincreasedrelativetothetotalmassofsurplusvalueasshownby(R%)fromthenondecreasesabsolutely.Inthe35thyearitdisappearscompletely.Itisonlyafterthe20thyearthatthefallintherateofprofitisfirstfeltasanabsolutefallinthatpartofthemassofprofitwhichthecapitalistclasshadatitsdisposalforitsownprivateconsumption.Untilthe20thyear,accumulationwasapayingpropositionasmeasuredbythereturns.Fromthe21styear,thesereturnsdwindledowntoavanishingpoint.Besidesthat,fromtheassumptionmadethattheadditionalvariablecapitalincreasesyearly5%,AVhasadeficit.Insteadoftheneeded26,265inthe35thyear,only14,756isavailable,leavingadeficitof11,509.Thisdeficitwouldrepresenttheindustrialreservearmyastheinevitableoutcomeofthecapitalistprocessofaccumulation.Thecapitalaccumulatedinthe35thyearcan’tfunctioncompletely.Because11509workerscannotbeemployed,thewholeadditionalconstantcapital(AV:510,563)cannotbereinvested.Onthebasisofourassumption,apopulationof551,548in6/19ThePermanentCrisisbyPaulMattick19342017/8/25https://www.marxists.org/archive/mattick-paul/1934/permanent-crisis.htmthe36thyearwouldrequireaconstantcapitalof5,616,200;consequently,byapopulationof540,075only5,499,015constantcapitalcouldbeinvested.Thereisacapitalsurplusof117,185thatcannotbeused.Insufficientcapital“utilisation”hasledtoover-accumulation.Wehaveasurplusofcapitalunabletoexpandandanunusablesurpluspopulation.(Theempiricalresearches,egbyWCMitchelintheUSAhasshownthatintimeofeconomicexpansionprofitisuninterruptedlyincreasing,whileacrisisisprecededbyadecreaseofprofits.)Thus,increasing“utilisation”ofcapitalisthechiefcauseofcapitalaccumulation,andthelackofasufficient“utilisation”ofcapitalthecauseofcrisis.Thetheoreticalformulationofthetheoryofover-accumulationasherepresentedwasfirstundertakenbyHenrykGrossmanwhoconsidershisworkasonlyareconstructionofMarx’stheoryofaccumulationwhichisthetheoryofcrisisandcollapse.AccordingtoGrossman,ifaccumulationistotakeplace,theorganiccompositionofcapitalmustincreaseandthenarelativelyevergreaterpartofthesurplusvaluemustbetakenforthepurpo