This is a journey through a publishing house in Saudi.

Whereas Iranian publishers are complaining that cost-saving plans to print Qur’ans in China have led to an embarrassing number of typographical errors.

Officials are now discussing a ban on Chinese-printed Qur’ans.

“We’re perplexed,” said Jim Norvelle, spokesman of Dominion, which operates the North Anna nuclear plant, located about 10 miles from the quake’s epicenter in Mineral, Va. He said the plant’s engineers had estimated that the two reactors, which went online in 1978 and 1980, could withstand quakes of between 5.9- and 6.2-magnitude.

Henryk Grossman: an introduction

Henryk Grossman is particularly relevant today and not only because of his explanation of economic and financial crises, which I will briefly recapitulate. That theory was formulated and can only be understood as an element in a broader, classical-Marxist analysis of capitalist society and the way it can be superseded. The specifics of Grossman’s political outlook help explain the generally hostile reception of his work in the immediate wake of the publication of his best-known study, The Law of Accumulation and Breakdown of the Capitalist System,Being also a Theory of Crises, and subsequently. Grossman expressed his revolutionary Marxism not only in his writings but also in political activity. That was not always flawless – on the contrary. But his views about the responsibilities of socialists are superior to fashionable notions of the responsibilities of intellectuals. Furthermore, the continuities and discontinuities in his practice and, in some periods, the inconsistencies between it and his theoretical commitments are instructive.

 

Economic crisis

 

The purpose of Henryk Grossman’s economic research was to advance the class struggle. From 1920, if not before, he subscribed to a particular, Leninist conception of Marxist politics which overlapped with views he had already put into practice well before the First World War, particularly by helping to build a revolutionary organisation of Jewish workers in Galicia.

 

By exploring the economic roots and implications of commodity fetishism and their relationship to capitalist crises and revolution, Grossman therefore also complemented Lukács’s arguments in History and Class Consciousness, which focused on ideology and revolution but not economics.

 

Marxist and other criticisms of the way capitalism generates oppression and alienation powerfully justify the struggle for socialism. As a young man, Grossman was himself actively involved the Jewish working class’ fight against both oppression and exploitation. But, following Rosa Luxemburg and against those who thought that capitalism could be reformed into socialism, he insisted that Marx regarded the bourgeoisie as incapable of consistently sustaining workers’ lives. Capitalism has a tendency to break down economically, throwing a part of the working class out of work and attacking the living standards of those who retain their jobs. Today, that tendency is particularly apparent.

Grossman made two major contributions to our understanding of economic crises. The first was already outlined in 1919, developed in his 1929 The Law of Accumulation and further elaborated in (semi-published) detail in 1941. Capitalist production, he pointed out following Marx, is at once a labour- process creating use-values with particular physical characteristics and a process of self-expanding value creating new wealth through the exploitation of wage- labour. This analysis provided a means of eliminating what was deceptive in the pure categories of exchange- value, thus creating a foundation for further research into capitalist production and affording him the possibility of grasping the real interconnections of this mode of production behind the veil created by value.

The satisfaction of the requirements for the proportional expansion of both these processes at once can only be passing and accidental. Far from being characterised by equilibrium – as assumed by the inaccurate and static assumptions of mainstream economics – capitalism is necessarily dynamic, uneven and crisis-prone. Grossman demonstrated that this was even true in the case of simple reproduction, where the scale of output does not expand.

Furthermore, capitalism’s tendency to break down is grounded in a contradiction at the heart of the production-process. There is unlimited technical scope to expand the productivity of human labour, but this is restricted by the logic of production for profit, giving rise to the break-down tendency. The exposition and defence of Marx’s account of the way capitalism limits the possibilities for the self-expansion of value was Grossman’s second, and best- known, contribution to crisis-theory. It is, however, grounded in the first.

Capital-accumulation means that the proportion between the numbers of specific kinds of means of production (raw materials, buildings, machinery etc.) used in production increases compared to the number of workers employed. This is the technical composition of capital. The ratio of the values of means of production to means of consumption (on which workers spend their wages) – the value-composition of capital – changes as, with technological advances, the amount of labour-time (the foundation of value) required to make them declines unevenly. In the longer term, however, there is no reason to believe that the value of means of production falls more rapidly than the value of means of consumption. So the organic composition of capital, which expresses the effects of the technical composition of capital on the value- composition of capital, tends to rise: capitalists spend more on means of production than on buying labour-power. As Grossman pointed out in a passage that does not appear in the English translation of The Law of Accumulation

The pure value perspective that has been taken over from bourgeois economics has already permeated so deeply into the consciousness of Marx’s epigones of all colours, from reformists to communists, that the most basic Marxist concepts have been distorted and corrupted. Thus the concept of the organic composition of capital. Marx distinguishes a technical and a value composition and finally, as the third concept, the organic composition, by which designation he understood the ‘reciprocal relationship of the two previously identified, namely ‘the value composition of capital, in so far as it is determined by its technical composition and reflects changes in it. The organic composition of capital, formulated in this way ‘is the most important factor’ in inquiry into capital accumulation. Of all this not a trace remains in the work of Marx’s epigones.

Amongst the mistaken commentators on the organic composition of capital, Grossman counted the Social Democrats Karl Kautsky, Rudolf Hilferding and Emil Lederer; the Communists Eugen/Jenö Varga and Nelli Auerbach; and the academic Ladislaus von Bortkiewicz, who ostensibly solved the ‘transformation problem’. The organic composition of capital is important because it is only living labour that gives rise to new value. If the rate of exploitation and number of workers employed remains constant, the amount of surplus-value produced will remain the same but capitalists will have spent more to generate it. The rate of profit will have fallen.

 

Marx and Grossman identified the tendency for the rate of profit to fall as a crucial contradiction in the process of self-expanding value. They also described mechanisms which serve to counter-act it. Amongst the countertendencies is the intrinsic cheapening of means of consumption through technological change, which can lead to increases in the rate of exploitation without cuts in workers’ living standards. Crises also eventually lead to improvements in profitability as bankrupt or failing businesses sell off their assets at a discount to other firms whose costs of production are thus reduced. Furthermore, when means of production lie idle and decay, crises destroy value. War has similar consequences. But there are other measures which capitalists and states can deliberately pursue to maintain or improve profit rates. Amongst these, attacks on workers’ living standards are particularly significant. Grossman explained that capitalism’s breakdown tendency takes the form of recurrent economic crises, conditioned by the empirical course of the tendency for the rate of profit to fall and its countertendencies. For him, it was definitely not a unidirectional path to final collapse.

 

There is also a fundamental connection between capitalism’s crisis-tendency and imperialism. Before World War I, Marxists had elaborated theories of imperialism as a necessary consequence of capitalist development. Karl Kautsky linked this with capitalism’s crisis-tendency, which he generally understood in underconsumptionist terms, the problems capitalists have in realising the surplus-value embodied in commodities by selling them.

 

The system of trusts and cartels and that of militarism cannot guarantee the capitalist mode of production against collapse. Neither can the export of capital with its resulting new-type colonial system. However, the new colonial system, like the system of trusts and cartels and that of militarism, has become a mighty means of holding back this collapse for several decades.

 

Colonial policy has become a necessity for the capitalist class, just as militarism has.

 

Kautsky changed his mind in 1914. Like the starry-eyed proponents of globalisation as the guarantor of world-peace up to (and even beyond) the US- led invasions of Afghanistan and Iraq, Kautsky maintained that the degree of integration of capital across national boundaries, ‘ultra-imperialism’, reduced the likelihood of war.

 

Rudolf Hilferding asserted, in 1910, that imperialism was ‘the economic policy of finance capital’, ‘bound to lead towards war.’ He insisted that ‘the idea of a purely economic collapse makes no sense’ and did not link imperialism to capitalism’s crisis-tendencies. Rosa Luxemburg, however, provided an explanation of imperialist expansion into non-capitalist territories as a means to offset capitalism’s inability to realise the surplus-value it had created.

 

Accumulation is impossible in an exclusively capitalist environment. Therefore, we find that capital has been driven since its very inception to expand into non- capitalist strata and nations, ruin artisans and peasantry, proletarianise the intermediate strata, the politics of colonialism, the politics of ‘opening-up’ and the export of capital.

Otto Bauer demonstrated that Luxemburg’s proof that capitalism’s survival depended on its expansion into non-capitalist territories or spheres of production was wrong. He used a version of Marx’s reproduction-schemes, tables that followed the pattern of accumulation over successive years, given certain assumptions, to show that capitalism could survive in a purely capitalist world.

 

Amongst the leading Bolsheviks, while Nikolai Bukharin did not identify capitalism’s tendency to breakdown as a cause of imperialism in his major study, Lenin did. But he wrote little more than

 

[t]he need to export capital arises from the fact that in a few countries capitalism has become ‘overripe’ and (owing to the backward state of agriculture and the poverty of the masses) capital cannot find a field for ‘profitable’ investment.

 

Paradoxically, Bauer’s refutation of Luxemburg was the starting point for Grossman’s vindication of her basic positions: that there is a breakdown- tendency in capitalism and that this gives rise to imperialism. Grossman extended a simplified version of Bauer’s own reproduction-scheme beyond a few years and found that the system broke down because of the tendency for the rate of profit to fall. He specified the nexus between capital-accumulation, crisis, imperialism and war in terms of efforts by capitalists and states to offset the fall in the rate of profit. In particular, unequal exchange, through foreign trade, helps bolster the profits of imperialist powers at the expense of less developed countries, while monopoly control over raw materials does so to the cost of their imperialist rivals.

 

Finance-capital and neo-harmonism

 

As during the 1920s and 1930s, orthodox economists and governments have attributed the economic crisis that began in 2007 to the lack of effective state regulation and/or transparency of the financial system. Identifying the immediate causes of the current crisis is an empirical task. Problems in the realm of finance and inadequate state-regulation have, indeed, been a trigger. But there is also a methodological question: are there underlying, more fundamental processes that ultimately condition or give rise to the surface appearance of the crisis? The issue here is that of abstraction. Henryk Grossman already stressed the importance of going beyond ‘naïve empiricism’ by abstracting from less salient features of the real world in order to lay bare underlying structures in a 1919 lecture. In The Law of Accumulation, he explicitly drew attention to, and himself employed, Marx’s method in Capital, by initially abstracting from, and then successively reintroducing, the complicating factors that are characteristic of concrete reality. As Grossman pointed out in a supplementary essay, Marx reorganised his plan for Capital precisely in order to implement this method in his explanation of the capitalist mode of production.

 

The growth of financial speculation over recent decades was spectacular. ‘Subprime’ housing loans in the USA were only one aspect of the phenomenon. Foreign-exchange transactions in 2004 were more than sixty times greater than the value of all the world’s exports. In 2005, the notional amount of over- the-counter foreign-exchange derivatives was almost two and a half times greater than the value of global exports. Other indices of the flow of capital into speculative rather than productive investment were the scale of private- equity/leveraged buyouts and the fact that hedge-funds in 2006 managed over US$1.1 trillion. While the US finance-sector only realised 10 per cent of total corporate profits in 1980, the figure was 40 per cent in 2007. Most of the transactions on financial markets are a zero-sum game: players only gain at each others’ expense. The key question is why this shift, which some have called ‘financialisation’, has taken place.

 

Grossman pointed out in 1929 that, as the rate of profit declines, capitalists in productive sectors will increasingly turn to speculative activity. This goes a long way towards explaining recent developments. Low profit-rates characterised the end of the long boom of the 1950s and the 1960s. They recovered in the wake of the recessions of the mid-1970s, early 1980s and early 1990s, each in turn the deepest since the Depression. But not to the levels of the long boom. So capitalists invested at an increasing rate in speculative financial assets rather than productive activity. Grossman insisted,

 

the very laws of capitalist accumulation impart to accumulation a cyclical form and this cyclical movement impinges on the sphere of circulation (money market and stock exchange). The former is the independent variable, the latter the dependent variable.

 

On this basis, Grossman attacked Social-Democratic ‘neo-harmonists’ like Rudolf Hilferding, twice Germany’s Finance-Minister during the 1920s, who argued that it was possible for the working class to take state-power by parliamentary means and to overcome capitalism’s pattern of booms and slumps on the road to socialism. The growing domination of production by larger and larger corporations and cartels, he maintained, meant that a government could achieve a forthright programme of reform by managing the capitalist economy, especially through state control over the banking system. Resistance from the German Social Democrats’ coalition partners and the Party’s own timidity meant that Hilferding never put his ideas into practice. But governments whose pronouncements were ever-so-recently neoliberal are now trying out Hilferding’s prescriptions for pragmatic reasons. This applies in Europe, Asia and North America, but I will provide an antipodean example.

 

In 2007, before the elections that made him Australia’s Prime Minister, Kevin Rudd reassured business that he was ‘a fiscal conservative’. But, in early October 2008, the Labor Government decided valour was the better part of discretion by speeding up expenditure on public infrastructure from the Future Fund. Again, this was designed to reassure corporate Australia: Labor will do whatever it takes to secure growth and, especially, profits. In the face of the crisis, a prolonged and careful assessment of how to spend the billions of dollars in the Fund on competing projects was set aside. It was necessary to get the money flowing to make up for the very rapid anticipated slow-downs in Australian investment, consumption and income from the export of minerals to China. A few days later, the Board of the Reserve Bank of Australia, on which the head of Treasury sits alongside a majority of corporate heavy- weights, had the same fears as the Government. So it cut the official interest- rate by a whole one per cent, for the first time since 1992. Further extensive reductions in interest-rates and attempts to boost demand have followed.

 

These measures looked like Keynesian economics, where the government steps in to sustain growth and make up for the deficiencies of markets. But the massive policy-shift was more than Keynesian. Governments of the world’s most prosperous countries provided tens and hundreds of billions of dollars to bail out first private and state banks and then strategic manufacturing corporations. In the USA, Britain, Belgium, Luxembourg, the Netherlands and Iceland, they nationalised failing banks. Some Republicans in the United States and conservatives elsewhere expressed concerns about creeping ‘socialism’, as governments made gifts to and took over banks and promised to regulate the rest much more closely. As the crisis deepens, there is bound to be even more overt state-involvement in economic activity and more of this kind of ‘socialism’, of which Hilferding would have approved. Yet, whether such state-capitalist measures are deemed ‘socialist’ or not, the important final chapter of The Law of Accumulation (missing from the English translation) concluded that they are unlikely to resolve the underlying problems.

 

As the crisis in the real economy intensifies, capitalists and governments are turning, pragmatically, to measures that will help to restore profit-rates. ‘In the national interest’ they call on everyone to ‘tighten their belts’ for the common good. They have ‘wage-restraint’ and ‘responsible management’ of social- security outlays in mind. In other words, they will intensify the class-struggle from above, attempting to raise profit-rates by increasing the rate of exploitation. Inflation and currency-devaluations can have this effect too, as Grossman pointed out in relation to the French premier Léon Blum’s devaluation of the franc in September 1936. In the short term, as unemployment rises, such measures will intensify the economic contraction by reducing consumer- demand. In the longer run, at the expense of mass misery, successful attacks on workers will help overcome the crisis. Another vital factor in a recovery is the devalorisation of capital resulting from bankruptcies, the sale of failing businesses in the productive sector at large discounts, and state-imposed rationalisation of industries by shutting down less efficient operations.

 

Grossman drew conclusions, which reflected his political orientation, from his analysis. If capital now succeeds in pressing down wages and thus raising the rate of surplus- value . . . the existence of the capitalist system can be prolonged at the expense of the working-class the intensification of the breakdown tendency slowed down and thus the end of the system postponed to the distant future…. Conversely, if working-class resistance counteracts or overwhelms pressure from the capitalist class, the working class’s struggles can win wage rises. Thus the rate of surplus- value will decline and consequently the breakdown of the system will accelerate. . . . It is thus apparent that the idea of a breakdown that is necessary on objective grounds, definitely does not contradict the class struggle. Rather, the breakdown, despite its objectively given necessity, can be influenced by the living forces of the struggling classes to a large extent and leaves a certain scope for active class intervention.

In India the name Dhanbad is synonymous with coal mafia. Together with the ‘nationalised command’ over the mines appeared a ‘mafia mode of production’, which was both part and outcome of the re-structuring process.

‘Illegal mining’ existed before nationalisation, it emerged – it was ‘illegalised’ – with the introduction of land property titles and the encroachment of common land by the colonialism.

Also read:

• Dhanbad, India – Report from a Visit in the Coal Fields
• Coal Mining in India
• The Dhanbad-Jharia coal-mining area
• The Coal-Mining Sector during Colonialism and after ‘Independence’
• The Period 1971 to 2011: A Short Summary
• The Nationalisation 1971 – 1973
• Mechanisation
• Casualisation and (Re-)Privatisation
• The Situation Today: A Visit in Dhanbad

Recently Nouriel Roubini got a lot of attention for saying that Marx basically got the battle between labor and capital correct, and that capitalism itself now stood on the brink of collapse.