Re: / Andrew T on Marx, Luxemburg and Grossman

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Nov 01 2004 - 11:03:39 EST

At 10:29 AM +0000 11/1/04, Paul Cockshott wrote:
>   Rakesh:
>Presumably the message from Kaleckian theory to the working class is
>simply this: "help the ruling class overcome any 'Protestant'
>inhibitions against luxury, consumption and decadence, for the
>stability of your employment depends on their use of credit lines to
>finance their overconsumption."
>   We can safely assume that capitalists will consume enough to realize
>all of surplus value. To be sure, this puts a burden on them. Imelda
>Marcos had to shop a lot and find room in her closet for new pairs of
>shoes. Who cares?
>I think it is certainly true that a sufficient level of unproductive
>expenditure will offset any tendency for the rate profit to rise,
>simply because sufficient unproductive expenditure puts an end
>to accumulation.

For Andrew T who as Paul Z should know is a member of this list and
thus an automatic recepient of my comments on his critique of
Grossmann, unproductive expenditure is not treated as a residual or
passive variable. Its autonomous increase ex ante allows for the
greater production of value and an increase in the rate of s/v ex
post facto. Unproductive expenditure thus does not come at the
expense of accumulation. Andrew T maintains the rates of accumulation
built into Otto Bauer's scheme. He then shows that based on
reasonable assumptions about the autonomous increase in luxury
spending the rate of s/v can be shown to increase at such a rate as
to neutralize the rise in the OCC built into the Bauer scheme: the
scheme will thus not break down due any shortage of surplus value for
at least one hundred periods.

Setting aside whether the rise in the rate of s/v could actually be
imposed on the working class, the whole demonstration is undermined
by taking such a low OCC in the first place. If the starting point
for the OCC was higher than stipulated in Bauer's scheme--and as
Grossmann points out Bauer's starting point is unreasonably low--then
accumulation could bring it to the point much sooner than one hundred
periods when clearly unreasonable assumptions about the rise in s/v
would have to be made to sustain the scheme. It's not the autonomous
increase in luxury spending that Grossmann would have found
unreasonable, but the rise in the s/v that the autonomous increase in
luxury spending would have to effect to maintain profitability at
high levels of the OCC.  A reading of Grossmann's correspondence
about the reception of his book (collected and analyzed by Rick Kuhn)
suggests that Grossmann would have responded at least in to Andrew's
critique in this way.  I don't think Andrew T had kept up with Kuhn's
latest research before he wrote his critique of Grossmann.

Aside from this, you are theorizing unproductive expense not in the
classical Malthusian manner of solving a realization problem or in
the Kaleckian/Trigg manner  of an autonomous increase in effective
demand but as a diversion from accumulation and thus a stabilizer of
the OCC.

>What one has to consider is whether this is a likely situation
>to occur, and under what circumstances.
>I think that something rather like it occurred in late Victorian
>Britain, and was related there to the bourgeoisie adopting the
>mode of life of the landed aristocracy - buying large country estates
>employing armies of servants etc. However this stage seems to have
>come to an end during the 20th century when accumulation resumed
>at a somewhat faster rate.

No time now to quote Marx on the decline in the rate of profit
actually serves to increase the rate of accumulation. See Marx
quoting Richard Jones on this in the third volume of Capital. Samuel
Hollander makes a lot of this possibility.

>There seem to have been a couple of factors that were influential
>in this:
>1. The influence of government policy aimed at preventing
>    mass unemployment - this was crucial after 1945
>2. Possible influence of international competition stimulating
>    the need for more industrial investment. My calculations
>    showed that from the start of the 20th century the rate
>    of accumulation out of surplus value rose. Any identification
>    of causes here is inevitably speculative but I tended to think
>    that it was competition with Germany and America that may
>    have been relevant.
>However the effect of government policy on accumulation post 45
>is only comprehensible as a consequence of the recession after 29.
>This in turn indicates that the luxury consumption of the rich
>was already an unstable basis for absorbing surplus value.
>I don't know if anyone has figures to show that luxury consumption
>fell at the end of the 20s?
>Of course one has to take into account the fact that several new
>industries were opening up to stimulate industrial accumulation
>in the 20s.
>If you turn to the US today, what is the percentage of surplus
>value that is accumulated and what is the percentage that is
>spent unproductively - have any of you US resident OPE-List people
>worked this out?

Well yes this is Fred's major empirical project, no?

>  Why
>Andrew T thinks that has proven to be a greater source of problems
>for the capitalist system as a whole than periodic drops in
>profitability from rises in the OCC I have no idea; he certainly does
>not show that various phenomena can be traced to the problem that he
>isolates. So his theory does not have the consilience (to mis use
>Whewell's word) that Grossman's theory had.
>I am at a disadvantage in not having seen Andrew's paper, but
>it looks to me as if he is merely drawing peoples attention to
>some old results from the 30's that are perhaps not as well known
>as they should be.

But I don't think it is true that a crisis of overproduction was
brought about by less than robust autonomous increases in luxury
spending. That would have made for interesting workers' banners in
the Great Depression: Capitalists of the World Unite and Luxuriate?!


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