1. that capitalist consumption cannot be compromised by capital accumulation and thus capital cannot be understood simply as accumulation for the sake of accumulation to the extent that the latter compromises capitalist consumption 2. Grossmann showed why a rising rate of exploitation is likely required for continuing capital accumulation if it is not to compromise capitalist consumption. 3. Grossmann's explanation for excess capacity differs from Brenner's, but Brenner's dynamics are superior to Itoh's 4. Grossmann's demonstration that the rising rate of exploitation would issue in greater absolute misery of the working class at a late stage of acccumulation is presently being confirmed, in part by the globalization of production. Mssrs. Krugman and DeLong have not a clue to its significance. 5. Grosmann's emphasis on conflicts within the abode of production explains why he has been passed over for pseudo marxist theories which keep their focus on exchange relations in the market--e.g., disproportionality relations between depts-- or between consumer good output and worker purchasing power.
These pt are made in the course of a continuing reply to Andrew; and the reply assumes only the most basic familiarity with Grossmann's reproduction scheme outlined in Howard and King's History of Marxian Economics, vol. 1
I think I have shown that Grossmann's breakdown is the exact pt at which investment demand equals the total value of the previous output, leaving nothing for capitalist consumption. Breakdown does not necessarily obtain because the demand for investment goods exceeds their production in the previous period. If necessary we could increase the rate of surplus value arbitrarily to make the exact value of the previous output, surplus value included, equal to the exact value of the present investment demand, the full additional v included; then the only thing curtailed--extinguished in fact-- would be capitalist consumption. And this is surely Grossmann's argument: at this point, accumulation loses all meaning for the capitalist class and thus 'breaks' down; capital will not accumulate for the sake of accumulating if it must sacrifice its consumption fund thereby.
But if one conceptualizes capital as accumulation for the sake of accumulation--which is not precisely right as Grossmann shows here--one may then believe that capital would continue to accumulate until the total value at t was exceed by the demand at t+1 as per Andrew's breakdown equation, even if the capitalist class had to live on air for some time.
But this is absurd. Even Andrew's equation does not really show that investment goods are underproduced relative to investment demand at t+1;
rather it would be more accurate to say that at the breakdown point the rate of surplus value, fixed by Grossmann at 100%, was not high enough for capital to continue to meet its accumulation requirements while allowing at least stability in the capitalist consumption fund.
Only by raising the rate of exploitation can capital overcome excess capacity at Andrew's t+1 (or yr 35 and 36 in the scheme). Do note then that Grossmann does provide a different explanation for excess capacity than Brenner--not overproduction from "competition" but the insufficiency of surplus value to sustain the rate of accumulation by which there would be sufficient effective demand, as the Keynesians would put it, for the growing total output of both departments. This suggests that capitalism's solution to the present excess capacity is not simply a recession with which to wipe it out but a higher rate of exploitation by which to sustain a higher rate of accumulation with which to absorb the growing product of both departments. Capital needs first and foremost political victories against labor. That is, Grossmann's theory leads us to underline the class war capital must fight at all economic, social and political levels to overcome its overproduction, excess capacity. The focus is on class war and that represents a scientifically correct apprehension of the actual nature of this society.
Again this is clearly the conclusion Grossmann is drawing--that in the absence of the most radical "capital savings" innovations, capital must increase the rate of exploitation in order to continue to accumulate.
(Of course why capital must continue to capitalize production at ever higher levels, i.e., accumulate intensively, is another question, one Sweezy raised emphatically--of course capital may not accumulate intensively for some time. One could say that one aspect of Brenner's superiority to Itoh is that international competition will indeed tend to cut short periods of pure capital widening which serve to relieve upward pressure on the OCC and therefore alleviate the crisis in the shortage of surplus value.)
It would have been nice if Grossmann had worked out how high the rate of exploitation must rise in each successive period for accumulation to continue fully. i.e. such that there is no excess capacity.
The whole pt of his theory is that eventually the rate of exploitation must be so astronomical that capital will eventually attack the historically evolved real wage which will issue in the ABSOLUTE MISERY of the working class for whom the reduced real wage is no longer sufficient to compensate for the intensified labor they perform (as a result of taylorisation, hyper taylorisation, just in time production, etc). . As the real wage has hardly moved in the last twenty five years, while the labor process has been intensified, I hope that you can understand my interest in Grossmann's theory--a true example of living marxism.
Now one way capital is attempting to escape the contradiction is by hiring proletarians abroad whose moral historical wage has been determined in conditions of low productivity. While technology is increasingly making them quite productive in the transplanted factories in which they themselves work, wages are not determined in terms of their own "marginal productivity" of course but by the low average conditions of productivity in the nation
(Mssr Krugman and fellow bourgeois economist Mssr Bradford J DeLong are of course deeply wrong to think that very limited FDI, however productive workers are in those plants, will lead to increased wages which will rather continue to be determined in terms of generally low productivity of the nation as a whole. FDI or internal accumulation is with very few exceptions too small to make a dent in the that low average national productivity. Where either was sufficiently high before to enable real wage gains has now been reversed; witness the horrific return of the reserve army of labor in South Korea.)
Thus if capital can use such workers without a loss of productivity or if their low wages more than compensate for any productivity loss, then capital can enjoy the increases in the rate of exploitation the further accumulation of captial requires without risking conflagaration at the point of production. But of course capital does not have this escape route freely available and must risk war at home.
Having disturbingly entered the hidden abode of production only to reveal a raging and intensifying war in the course of accumulation, Grossmann was promptly met with short dismissals and silence of the same sort Marx had confronted and Mattick would later suffer.
To this day, bourgeois economists and pseudo marxists would rather locate crisis tendencies in the breakdown of equilibrium relations between the two major departments in the market (Tugan, Hayek, Bauer, Lowe, Hicks are all disproprtionality theorists) or in the discrepancy between consumer good output and consumer demand (crude underconsumptionism, along with moral and highly graphic complaints about how unfair income distribution is and how much the gini coefficient has risen). This leftist underconsumptionist ideology is no less a retreat from production than Walras'.
Consider that the only theory of accumulation and crisis to center on the conditions of production from the perspective of the working class has never been fully translated into English; and the abridged version of Grossmann's magnum opus leaves out exactly the conclusion about the intensification of the class struggle!
best, rakesh
ps. thanks to the one person who read this far, and I will pick up the half and half. Ha!