In fact, I find Grossman's arguments turning against themselves. He allows that the production of ever more use values gives the system elasticity. With more means of production and more wage goods more labor and surplus labor can be absorbed; there is also no reason why the depreciation of capital goods through technical progress could not limit profit rate decline (though I don't think technological progress makes profit rate decline impossible a la the comparative static Okishio Theorem); there is finally no reason that wars, anti terrorism spending may not stimulate the economy such that it can run down its capital equipment, preparing the way for renewed accumulation on the basis of cheaper and more powerful capital goods.
I haven't argued for breakdown per se, but first and foremost against the thesis that deficit spending Keynesian management whether through profit led investment or social democratic redistribution has and will likely keep the economy on a robust growth path. This skepticism is not grounded in capital crowd out effects, rational expectations, or the discipline of global financial markets on states. It's grounded in the theory of surplus value and fictitious capital.
Also catastrophe need not only express itself in prolonged economic contraction (but the general reversals suffered by labor show what has been needed to maintain profitability) but also international political breakdown, the final burial of the Westphalian order and authoritarian changes in the state form.
Finally, I don't downplay the importance of Grossman's analysis of counter-tendencies. on the contrary.
For example, I wrote five years ago:
I have reservations about the new empirical attempts to measure profit rates within nations. For example, Wolff (2003) shows that the profit rate rose in the United States between 1983 and 1997 and speculates that the reasons for the recovery included such factors as a cheapening of capital goods (and thus the denominator in the profit rate) and the creation of new sectors to the US economy in which value added was high as a result of their relatively low value composition of capital.
I shall make three replies here.
(A) As Moseley (1997) shows, the profit rate in the US has only partially recovered; it still remains low in the context of the post War period even despite the extreme anti labor measures taken by employers and the state. In other words, the partiality of the recovery and the very countertendencies that have been called forth indicate the underlying force of declining profitability.
(B) Marx did not argue that the rate of profit must fall at all times, only that the accumulation of capital would tend to exert upward pressure on the organic composition of capital and therewith downward pressure on the rate of profit. Through mergers and acquisitions the rate of accumulation can be at least temporarily lowered and the rate of profit thereby bolstered, though this will tend to increase the real rate of unemployment (there are many hidden forms of unemployment--uncounted discouraged and disabled workers, excluded prisoners and military personnel, part time workers looking for full time employment, and workers who cannot find jobs that lift them out of poverty). The period between 1982-1997 saw an explosion of real unemployment (from which the working poor suffer in my estimation) and the centralization of capital (on the latter, see Duboff and Herman [2001]). It is reasonable to assume for the reason Mattick specifies immediately that centralization served to maintain profitability:
And because the centralization process can raise the rate of profit even in the absence of capital concentration, simply by the reorganization and different utilization of the existing capital, a relative stagnation of capital does not at once express itself in lower profits. On the other hand, the hastened concentration and centralization of capital can also be seen as measures forced upon capital to maintain its profitability. Insofar as these measures compensate for lack of sufficient new investments, they hold down the rising organic composition of capital, thus bolstering the rate of profit at the expense of accumulation. But while the rate of profit may be maintained, general economic activity stagnates, for it cannot advance without the production of additional capital. Sooner or later, the stagnation leads to a crisis, which can be overcome through the resumption of the accumulation process.
(C) The partial recovery in the US profit rate has tended to come at the expense of the profitability of capitals elsewhere. Shoul (1947) shows that both Marx's and Grossmann's respective theories of counter-tendencies did not differentiate between those that saved one capital at the expense of another from those that raised the rate of profit in the system as a whole. And that confusion tends to pervade the literature on profit rate trends in the US. An exception is Brenner (1998) who argues that recoveries in profitability for the major industrial countries have most often come in the last three decades at the expense of each other, given the resort to the use of politically managed currency devaluations and competitive compression of wages. A purely national focus on the profit rate, such as Wolff's, leaves us unable to determine whether the profit rate in the system as a whole has in fact recovered. Aside from the mechanisms for geopolitical displacement of falling profitability specified by Brenner, James Galbraith (1989, 1997) has called attention to the restructuring of the international division of labor. The high interest regime imposed by Volcker in the early 1980s induced bankruptcies and forced a restructuring of capital, if not morphological changes in US industrial structure. Galbraith underlines that with each recession firms in the relatively low value added consumer good industries have been shut down and relocated, leaving the US industrial structure top heavy with more highly profitable technological sophisticated industries. Advanced capital goods came to count more in the US's exports (Warner, 1995; Galbraith, 1997). What we have here then is not necessarily a recovery in profitability in the system as a whole but a concentration on the more highly profitable branches within the US. The ability of a nation state to concentrate within its borders more profitable activities does not raise profitability in the system as a whole; it only partially immunizes the successful nation state from the full force of its fall. As for why these branches are more profitable, Galbraith writes:
"...there is also the way that great individual fortunes are made, the way of creating seemingly instant wealth: by capitalizing on a transient advantage, by creating an indispensable product and reaping the surplus that others are willing to pay--so long as the monopoly holds--in order to own it. This leads in a straightforward direction. The US position in the global economy and its standard of living have depended on its ability to continue substantially to dominate world production of capital goods, of the machinery and equipment that flow into the industrial process. Further, that ability depends on its capacity to generate and sustain the expansion of an investment goods-producing sector serving a world market. Why capital goods? Because capital good embody design, and unique design is the essence of scarcity value. The machinery and equipment used in the production of goods and services--and not the final act of production itself--are what determine which technologies, which systems, become the basis of consumer life in the industrial world. For this reason, technical superiority in capital goods is the quintessence of advanced development, the ultimate rent-yielding activity. Superiority here is the one thing that cannot be emulated by a developing or industrializing nation or even a second-rate industrial power, not can it be undercut by low-wage competition. it is therefore the one thing that guarantees and advanced nation a high standard of living.
In short, the apparent recovery in US profitability does not weigh against the underlying force of the law of the tendency of the rate of profit to fall: the recovery has required an assault on the working class and still has only been partial, and it has compelled US capital to exit from entire branches of production on account of their low profitability, thereby leading to a process of de-industrialization and downward mobility which has in part been characterized by whites driving minorities out of position that the former had tended not even to want.
That some sectors--medical equipment, design and logic microchips, pharmaceuticals, software, aerospace, CAD equipment, etc.--have remained profitable hardly speaks to the heath of the system as a whole.
Finally there was in fact a serious drop in profitability between 1997 and at least 2002, and we are now only realizing that it may have been and may be deeper than companies with their eyes on the stock market were or are still letting on. The theory of the falling rate of profit is not obviously empirically invalid in spite of the partial recovery of the US profit rate in the 1980s and 1990s, and may remain the force that explains the consolidation of the very forces that overcame it, at least for certain groups of capitals.