Grossmania (fwd)

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Tue Sep 15 14:04:50 PDT 1998

I had sent this to Andrew privately but I think other arguments I have made require me to reply here. Nothing to fear as everyone has a delete key.

If Andrew wanted to be accurate, he would have said it is possible that the amount of goods rises and rises in real terms *at a diminishing rate*. It's not an inconsequential omission.

Now convinced that he can ignore capitalist consumption, Andrew argues correctly: only the sum of *value* available for capitalist consumption begins to decline in year 21. And we return to that perennial problem of the relevance of value categories if no one is acting in terms of them. And for this real advance in our discussion, I am thankful.

Andrew insightfully argues that declining unit values would enable increases in real consumption or at worst (I would suggest) perhaps stabilize consumption in real terms even as the sum of value available declines in absolute terms (and the decline gets very steep very quickly). He wrongly thinks this defacto treadmilling by the bourgeoisie will be without consequence to capitalist behavior. To some extent they will indeed have to accept slow downed growth in their own real consumption in order to stay in the game and capitalize surplus value. Grossmann himself emphasizes this.

It is obvious however that if the ruling class has become accustomed to steeply rising real consumption, then stability or small and ever smaller real improvements (as the decline in unit values begins to compensate less for what are very steep declines in the value available for capitalist consumption) may be little motivation for continued accumulation and the risks incurred thereby. There simply is not much possibility of getting that much richer year after year; there may well be a loss of "animal spirits" though the rate of profit remains positive. The system may begin to lose all meaning for them. But this is no mere subjective phenomenon; at a certain point, capitals cannot be induced to accumulate no matter how low the rate of profit falls and even if there is no rentier class. The working class should expect some strong political reaction, if not general social crises, while the rate of profit is healthy, accumulation strong, and capitalist consumption rising oh-so incrementally, if at all, in real terms.

To recap how this exchange began (as I remember it).

I only had mentioned that Grossmann showed it was *possible* for the rate of profit to fall while capitalist consumption and accumulation continued to increase. That was all I drew from Grossmann, not the breakdown argument.

Andrew then responded by not speaking to my specific point (that a falling rate of profit in itself need not generate crisis; and I will leave it to Andrew and others to figure out why he didn't speak to this specific point!!!) but by attacking Grossmann's scheme altogether, suggesting 1. that it was just a play with numbers and parameters (I then gave him a reason why Grossmann assumed continued accumulation with upward pressure on the OCC even though the profit rate continued to fall as a consequence ); and 2. that in Grossmann's scheme the falling rate of profit has nothing to do with why the system breaks down (as if this is a critique; Grossmann is very clear about why he thinks the simple demonstration of a fallling profit rate is not sufficient for a theory of crisis.)

At first I thought by investment goods Andrew meant constant capital and additional constant capital--this is what any non-economist would think, I believe. Anyways I do think it is important that it is not so much the value of investment goods per se but the *mass of surplus value* they represent which is crucial to Grossmann's argument. The accumulation of capital, with upward pressure on the OCC, continues to be met in the scheme for a long time: the whole damn question is why at a certain point this is no longer possible.

If we say with Andrew that investment demand is too big in relation to the production of investment goods, then why is this not so at yr 4 or 6 or 14 or 18? The parameters are the same in each of those years as the breakdown year. To say what Andrew insists upon is to say nothing.

best, rakesh

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