Re: Grossman

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Nov 08 2004 - 01:04:39 EST

Setting aside my criticism that rules should not be stipulated for
the autonomous increases of luxury spending if the consequence
thereof is physically and socially impossible increases in the rate
of surplus value--that is, the putative endogeneous variable (s/v)
does limit the action of the claimed exogeneous variable (rule based
increase in autonomous luxury spending) --Andrew responds:

At 12:52 AM +0000 11/8/04, A.B.Trigg wrote:
>This passage from Mattick is familiar to me,  but not easy to
>digest. If Say's Law is provisionally accepted, then with supply
>creating its own demand how can there be realization problems?
>Andrew T.

There is indeed no reason why say before the 21st period in Bauer's
extended scheme, capitalists may not as a whole undertake the level
of investment required to realize the surplus value that has been
produced. The absolute level of effective demand could prove
insufficient; and we don't even have to consider
disproportionalities. Perhaps the banks did not create enough credit
because they had too many bad loans on their books. There could well
be a K (Kaleckian or Keynesian) crisis of effective demand. But the
methodological point is to set that aside, to assume that capitalists
are undertaking the expanded level of debt financed investment that
would allow for the realization of surplus value. This after all is
not an unreasonable assumption: capitalists are forced by competition
to increase scale and capital intensity and are rewarded with ever
larger sums of surplus value that allow for an absolute increase in
their own personal consumption. The endogeneity of credit can be
reasonably assumed.

Now imagine what happens at the level of an individual capitalist. He
had hitherto expanded investment but perhaps the absolute mass of
surplus value appropriated has begun to drop or the sum left over for
his own consumption keeps dropping after he expands his level of
investment even though he remains successful at disposing of his
product at value. There has been no break down in the autonomous
increase in investment, demand has equalled supply; but accumulation
no longer pays.

  Each now stops making the expanded level of investment necessary to
realize the surplus value of the other. Demand no longer equals
supply. The provisional acceptance of Say's Law was meant to get us
further along in the scheme, to reveal the diminishing sum of surplus
value as an objective shortage and possible cause of the weakness of
further debt financed or autonomous investment which as Keynes
realized was the most important component of effective demand.

This is what I understand Mattick to be saying here: "because not
enough surplus value has been produced, capital cannot expand at a
rate which would allow for the full realization of what has been
produced. the relative scarcity of surplus labour in the production
process appears as an absolute abundance of commodities in

With that objective possibility uncovered, one need not always
explain the weakness of effective demand  in terms of the surface
categories of finance, circulation and psychology--that is, the basic
categories of vulgar economics. Which is not to say that bourgeois
understanding may not serve perfectly well (prove pragmatic) in some
recessions. But Marxian theory is not a pragmatism. It represents (as
Althusser brilliantly understood) a Bachelardian epistemological
break with the everyday categories of the marketplace.  Keynesian and
Kaleckian theory does not. They will thus have a much easier time
colonizing even oppositional thought. The difficulties of theoretical
practice are real.

The Marxian claim is that serious and protracted depressions in
effective demand cannot ultimately be explained with the categories
of bourgeois understanding and thus the practical remedies suggested
from within that horizon are bound to fail (bank reform by writing
off bad loans, deficit spending, confidence boosting, mercantilist
trade policy through tariffs or competitive currency  devaluation,
even progressive income redistribution). Or the actual reasons for
their possible effectiveness simply not recognized. E.g. deficit
financing could increase the rate of surplus value through its
inflationary consequences; mercantilist trade policy or imperialism
could stave off the fall in the general rate of profit at the expense
of others.


>       >  A reading of Marx in Capital, volume 3, also shows that it is
>       >difficult to realise such a monstrous amount of surplus value.
>       Difficult yes. Baran and Sweezy's difficulty of the sales effort, the
>       difficulty of creating ever newer Veblenian positional goods, the
>       Kalecki/Trigg difficulties in the financial sector subsidizing ever
>       more orgiastic luxury spending.
>       But what Grossmann's analysis predicated upon a provisional
>       acceptance of Say's Law uncovers is an even greater obstacle to the
>       realization of that monstrous amount of surplus value. As Mattick
>       pithily put it:"because not enough surplus value has been produced,
>       capital cannot expand at a rate which would allow for the full
>       realization of what has been produced. the relative scarcity of
>       surplus labour in the production process appears as an absolute
>       abundance of commodities in circulation."
>       >
>       >       I have two points to make:
>       Taking them in reverse order.
>       >
>       >       2. I cite Samuelson and Wolfson (1986) in the article as
>       >showing that the only dependent variable in the Bauer/Grossmann
>       >model is the capitalist propensity to save.
>       >  Hence with the OCC rising and rate of surplus value constant, the
>       >propensity to save must reach 100%: capitalist consumption collapses.
>       >In my alternative macro-monetary model capitalist consumption
>       >becomes an exogenous variable, part of the money cast into
>       >circulation by capitalists. The dependent variable is the rate of
>       >surplus value.
>       OK so in your interpretation not only do capitalists earn what they
>       spend but they determine the rate of s/v through their spending. But
>       there are constraints on the growth rate of the s/v rate. And these
>       you do not seem to theorize in your model.
>       >  Now under this alternative model there cannot be a breakdown due to
>       >scarcity of surplus value. With even a small rate of increase of
>       >capitalist consumption, a rising OCC cannot eat up all the surplus
>       >value - even if we start the Bauer simulation at a higher OCC. There
>       >is no year of precise economic breakdown due to drying up of surplus
>       >value.
>       No precise year could ever be deduced from Bauer's model anyway. Each
>       period could represent a month or a decade. The initial conditions
>       are arbitrarily postulated and a change in them would obviously
>       change the year of economic breakdown. This was my initial point,
>       drawing from Kuhn's research into Grossmann's correspondence.
>       Grossmann was very aware of the dangers of trying to deduce too much
>       from Bauer's scheme. Neither Sweezy nor Howard and King are fair to
>       Grossmann on this point. In G's analysis B's scheme is as much
>       positively used as criticized. The phrase G-B model is seriously
>       misleading.
>       >  I agree that a rising s/v is unreasonable.
>       Well then!
>       >  You say that it would be so because of workers resistance.
>       To the extent that workers cannot live on air,the rise in s/v will
>       necessarily find limits that the rise in the OCC will not. Cogoy
>       showed this. So did Yaffe before him as you recognize in your paper.
>       You can only be certain that  there will be no break down from a
>       shortage of surplus value at even very high levels of the OCC if you
>       allow, consequent upon autonomous increases in luxury spending, the
>       S/V to rise in physically and socially impossible terms. Without
>       determinate parameters and limits on the growth of s/v, one counters
>       Grossmann only by flight from living reality.
>       In short, an autonomous increase in luxury spending cannot be allowed
>       to raise the s/v without any limits at all.
>       >
>       >       1. Grossmann did think that the rate of surplus value should
>       >rise, as does Marx, in the falling rate of profit thesis.
>       Yes indeed. Howard and King's argument that Grossmann neglects the
>       effects of a rising s/v and  relative surplus value ignores that
>       Grossmann saves just that effect for intensive study in his
>       conclusion where the political implications of his variant of
>       breakdown theory are drawn. The conclusion is not in the English
>       version; it was translated by Kenneth Lapides in History of Political
>       Economy as I am sure you know.  The unabridged Spanish translation is
>       available on the American website.
>       Yours, Rakesh
>       >  However, neither of us are talking here about
>Grossmann-type breakdown.
>       >
>       >       Andrew T
>       >

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