“Third
Persons” and Reproduction:
A
Note to R. Luxemburg’s Critique of Marx’s Reproduction Schemes
George
Economakis and John Miliosi
Abstract
The
aim of the present paper is
to critically present Rosa Luxemburg’s critique to Marx’s
reproduction schemes of a pure capitalist economy in Volume 2 of
Capital,
as a point of departure in order to afterwards criticize the main
postulate of (Marxist) underconsumption theories, namely the thesis
that a “third party” of consumers, except capitalists and
workers, is necessary in order to act as
potential “absorbers” of the surplus capitalist production and so
to safeguard the ability of the capitalist economy to reproduce
itself on an expanding scale.
-
Introduction
Underconsumption
theories were utilized as explanatory approaches to economic
instability and crises since the Classical era of Political Economy
(Scumpeter [1954] 1994, 740 ff.). Later on, these approaches played a
very important role within the framework of Marxist crisis theory:
Underconsumption was initially regarded as the “orthodox” Marxist
interpretation of crises, to be later on challenged by competing
Marxist theoretical streams of thought, especially after
Tugan-Baranowsky
expounded a radical critique of underconsumption theory
on the basis of Marx’s reproduction schemes, in his Studies
on the Theory and History of Trade Crises in England
(published 1900 in Russian, and translated
into German the following year, Tugan-Baranowsky, M. v. [1900] 1969,
2000). However,
underconsumption theory never lost its influence among Marxists, as
profound theoreticians defended and still defend the main postulates
of it. This Marxist tradition starts with Rosa Luxemburg’s critique
of Marx’s reproduction schemes in Volume 2 of Capital,
which
had
served as a point of departure for many Marxist opponents of
underconsumption theories, in the line of argument of
Tugan-Baranowsky’s
Studies
(Milios 1994, Milios et al 2002, 158 ff.).
The
tension concerning the flow of
cause and effect in
the relationship between demand and supply, being a central point of
theoretical confrontation between orthodox (Neoclassical) and
Keynesian economics, preserved the significance of some of the
arguments developed by this tradition. It was in this theoretical
context that J. Robinson claimed about Luxemburg’s work that it
“shows more prescience than any orthodox contemporary could claim”
(Robinson 1968, 28). In this line of argument, Robinson attempted to
illustrate “the ‘Keynesian’ element in Marx” (Robinson [1942]
1991, vi-vii).
In
this paper we are going to critically present Luxemburg’s main
theoretical arguments in her polemics with opponent Marxist
theorists, in order to afterwards criticise the main postulate of
(Marxist) underconsumption theories, namely the thesis that a “third
party” of consumers, except capitalists and workers (i.e.
an “external market”
in relation to the capitalist mode of production)
is necessary in order to act as
potential “absorbers” of the surplus capitalist production and so
to safeguard capitalism’s ability to recover from crises.
We believe that the critical discussion of the “third party”
approaches may contribute to a better understanding of contemporary
discussions regarding the relation between income,
capable-to-buy-demand and supply.
-
The condition of
unimpeded reproduction of a pure capitalist economy according to
Marx
In the second
volume of Capital
(Marx [1893] 1992),Marx
formulates in terms of values the conditions for unimpeded
reproduction on (a simple and) an expanded scale of a pure capitalist
economy comprised of two sectors (or departments), one of which
(Sector I) produces means of production for the entire economy and
the other (Sector II) means of consumption for all workers and
capitalists. In other words, the reproduction
schemes developed by Marx in Volume 2
of Capital
show under what conditions the circuit of capital, M-C-M΄ may
function on the level of the capitalist economy as a whole, i.e. in
respect with the social capital.
Let us
postulate that Ιc + Ιv + Ιs is the output (the gross product) of
Sector I, which produces means of production, and ΙΙc + ΙΙv + ΙΙs
is the output of Sector II, which
produces means of consumption. For the conditions of unimpeded
reproduction to be fulfilled, the output in each sector must be equal
to the demand in both sectors for the means – of production or
consumption – produced in the sector under discussion.
Thus, in the
case of Sector I, which produces means of production, its total
output must be equal to the demand for means of production in both
sectors (for replacement of worn-out components and for
accumulation). The value of worn-out means of production is Ic for
Sector I and IΙc for Sector II, while their demand for additional
means of production (constant capital) for the purpose of expanding
their productive base (accumulation) is ΔIc and ΔΙΙc
respectively. Thus, the condition which favours unimpeded
reproduction of social capital on an expanded scale is:
Ιc + Ιv +
Ιs = Ιc + ΔΙc + ΙΙc + ΔΙΙc
(1)
Assuming
that neither credit relations nor value transfer can exist between
one sector and another and that
accordingly the surplus value appropriated by capitalists in Sector I
must secure satisfaction of both the consumer demand of capitalists
and their demand for constant and variable capital for accumulation,
the following will apply:
Ιs = ΔΙc + ΔΙv + Ιk
(2)
(where the figures ΔΙc+ΔΙv
denote the aggregate of additional constant and variable capital and
Ιk the personal consumption of Sector I capitalists).
From the
combination of relations (1) and (2) we conclude finally that the
expenditure of Sector I on means of consumption must be of the same
value as the expenditure of Sector II on means of production:
Ιc+Ιv+ΔΙc+ΔΙv+Ιk
= Ιc+ΔΙc+ΙΙc+ΔΙΙc Ιv+ΔΙv+Ιk
= ΙΙc+ΔΙΙc (3)
We would end up with exactly the
same relations (3) if we commenced from Sector II (which produces
means of consumption) and equalized its output (ΙΙc+ΙΙv+ΙΙs =
ΙΙc+ΙΙv+ΔΙΙc+ΔIΙv+IΙk) with demand in both sectors for
means of consumption (Ιv+ΔΙv+Ιk+ΙΙv+ΔIΙv+IIk).
The left
part of relation (3) represents the value of the means of production
which Sector I supplies after the abstraction from its overall
production of the value of the means of production needed by the
Sector itself, for its enlarged reproduction; it is, therefore, the
net production (or net supply) of Sector I. The right part of
relation (3) represents the value of the means of consumption which
Sector II supplies after the abstraction from its overall production
of the value of the means of consumption needed by Sector II itself,
for its enlarged reproduction; it is, therefore, the net production
(or net supply) of sector II. Since the overall demand in every
sector of a pure capitalist economy for means of production and
consumption is equal to the value of the gross product of that sector
(that is its overall supply) it is connoted from relation (3) that
the net demand of sector I for means of consumption is equal to its
net supply of means of production and the net demand of sector II for
means of production is equal to its net supply of means of
consumption or that the net demand for
means of consumption of sector I is equal to net supply of means of
consumption of sector II and the net
supply of means of production of sector I is equal to net demand for
means of production of sector II.
4. Luxemburg’s objection
and theoretical interpretation
According to R. Luxemburg, the
expanded reproduction in a pure capitalist economy is impossible. And
the cause is the insufficient demand as to supply.
“There may
even be a desire to accumulate in both departments, yet the desire to
accumulate plus the technical prerequisites of accumulation is not
enough in a capitalist economy of commodity production. A further
condition is required to ensure that accumulation can in fact proceed
and production expanded: the effective
demand for commodities must also increase”
(Luxemburg [1913] 1968, 131, emphasis added).
Following
this argument, she asks: “Where is this continually increasing
demand to come from, which in Marx’s diagram forms the basis of
reproduction on an even rising scale?” (op. cit. 131). For her, “it
cannot possibly come from capitalists of Departments I and II
themselves (…) it cannot arise out of their personal consumption
(…) That indeed is the foundation of accumulation: the capitalists’
abstention from consuming the whole of their surplus value” (op.
cit. 131-32). Neither can it possibly come from workers: “The
working class in general receives from the capitalist class no more
than an assignment to a determinate part of the social product,
precisely to the extent of variable capital. The workers buying
consumer goods therefore merely refund to the capitalist class the
amount of the wages they have received, their assignment to the
extent of the variable capital. They cannot return a groat more than
that (…) and if they are in a position to save (…) they may even
return less” (op. cit. 132). It can neither come from “the
natural increase of the population” since “there are only two
classes of the population according to Marx’s diagram, the
capitalists and the workers. The natural increase of the former is
already catered for by that part of the surplus value which is
consumed inasmuch as it increases in absolute quantity. (…) The
question is therefore whether the natural increase of the working
class (…) entails a growing effective demand over and above the
variable capital. And that is quite impossible (…)” (op. cit.
133-34). Also, it cannot possibly come from the “third persons”
belonging to the inside of a capitalist economy – like “the
landowners, the salaried employees, the liberal professions (…) the
Church and its servants, the Clergy, and finally the State with its
officials and armed forces” – since “within the limits of
Marx’s diagram there are in fact only the two sources of income in
a society: the labourers’ wages and the surplus value. All the
strata of the population we have mentioned as apart from the
capitalists and the workers, are thus to be taken only for joint
consumers of these two kinds of income” (op. cit. 134-35). Finally,
it cannot possibly come from “foreign trade” between
capitalist countries: “Recourse to
foreign trade really begs the question: the difficulties implicit in
the analysis are simply shifted – quite unresolved – from the one
country to another. Yet if the analysis of the reproductive process
actually intends not any single capitalist country but the capitalist
word market, there can be no foreign trade: all countries are ‘home’”
(op. cit. 136).
Luxemburg’s
key argument is, therefore, as follows: Since, on the one hand,
Marx’s reproduction schemes presuppose an expansion not only of the
production of means of production but also of consumer goods (see
relation [3]), while on the other hand such an expansion of personal
consumption is impossible without involvement of “third
persons” not belonging to capitalism (the principal thesis of all
underconsumption theories and/or theories of absolute immiseration)
the conclusion is that “on the question of accumulation,
mathematical problems can prove absolutely nothing, since their
historical premise is untenable” (Luxemburg, R.
[1921] 1972, 65). So, she concludes:
“Marx’s diagram of enlarged reproduction cannot explain the
actual and historical process of accumulation” (Luxemburg [1913]
1968, 348). In her view “realisation of surplus value requires
‘third persons’, that is to say consumers other than the
immediate agents of capitalist production (…) there should be
strata of buyers outside capitalist society (…) social
organisations or strata whose own mode of production is not
capitalistic” (op. cit. 350-52). In short, “that part of the
surplus value (…) which is earmarked for capitalisation, must be
realised elsewhere” (op. cit. 366).
According to
Luxemburg, these non-capitalist strata and organizations perform a
double function with respect to the two departments of capitalist
production-reproduction: “(1) Capitalist production supplies
consumer goods over and above its own requirements, the demand of its
workers and capitalists, which are bought by non-capitalist strata
and countries. (…) (2) Conversely, capitalist production supplies
means of production in excess of its own demand and finds buyers in
non-capitalist countries” (op. cit. 352). Yet, a reasonable
question arises at this point. What is the source of revenue of the
non-capitalist strata, “milieus” etc., for the purchase of
capitalist produced commodities? Luxemburg answers: They “receive
their means of purchase from an independent source,
and do not get it out of the pocket of the capitalist like the
labourers or the collaborators of capital (…) They have to be
consumers who receive their means of purchase on the basis of
commodity exchange, i.e. also production of goods, but taking place
outside of capitalist commodity production” (Luxemburg [1921] 1972,
57, emphasis added).
The above may
mean that the non-capitalist “milieus” only buy from the
capitalist economies and never sell to them. Put differently, between
capitalist and non-capitalist economies there is an one-way exchange
relation. This assumption is however not well founded, as Nikolai
Bukharin has extensively argued, in a polemic pamphlet against
Luxemburg, first published in German in 1925 (Bukharin [1925] 1972.
See especially 240, 247-48). Resuming that argument, Paul Sweezy
correctly stated that “it is not possible to sell to
non-capitalist consumers without also buying from them”
(Sweezy [1942] 1970,
205).
However, when discussing what
she considers to be Marx’s “contradictions
within the diagram of enlarged reproduction” (Luxemburg [1913]
1968, chap. xxv), Rosa Luxemburg assumes that a two-way exchange
relation between the capitalist economy and the non-capitalist
“milieus” does actually take place, the outcome of which is
though a constantly increasing imbalance in the capitalist economy: a
negative balance for the means of production and a surplus of
unsaleable means of subsistence.
In the next section of this
paper we will deal with this argument, in an effort to show that if
non-capitalist economic agents are connected to the capitalist
economy through relations of exchange of
equivalents, then the problem of expanded reproduction is modified,
and so is modified accordingly its solution. However, this
modification does not in any way mean that the problem posited by
Marx becomes solvable only through the existence of non-capitalist
“milieus”. Quite the opposite, Marx’s solutions is symmetrical
to the one obtained in the case of an economy comprising both
capitalist and non-capitalist sectors.
8. A reproduction scheme
with “third persons”
Synopsising
the above, it can be said that the basic question on which
Luxemburg’s theory is unable to make any pronouncement is how and
why the “third party” (“third persons of the colonies”) are
to buy up the surplus capitalist production. The only possible answer
to the question is that this “third party” acquires income from
production of non-capitalist commodities, which are then sold so that
capitalist commodities can (also) be purchased. It is therefore a
question of transactions between the capitalist and the
non-capitalist economies (or “milieus”). However, because what is
involved is by definition an exchange of equivalents, the capitalist
economy unloads (disposes of) the same amount of value as it takes on
(is supplied with). Marx’s
reproduction schemes are modified, but the supposed “problem”
with them, as the underconsumptionist theoreticians identified it,
does not go away.
Let us undertake such a
modification, postulating a simplified version where we suppose that
there are four sectors: two capitalist and two non-capitalist.
Specifically:
Capitalist sector I produces
means of production.
Capitalist sector II produces
means of subsistence.
Non-capitalist sector III
produces raw materials (means of production).
Non-capitalist sector IV
produces agricultural goods (means of subsistence).
We also
postulate that production in the non-capitalist sectors is a process
of simple reproduction of the autonomous non-capitalist producers:
the purpose is not profit but subsistence. Extrinsic labour power is
not used for production, whose end is simple reproduction of the
non-capitalist sectors. The non-capitalist producers are satisfied
with the equivalent of a workman’s wage (
surplus product = 0).
We thus have:
Sector Ι: Ιc + Ιv + Ιs.
Sector II: ΙΙc + ΙΙv + ΙΙs.
Sector III: ΙΙΙc + ΙΙΙvi.
Sector IV:
IVc + IVvi.
(Where vi is the equivalent of
the working wage of an independent producer).
In the case of unimpeded
reproduction, supply must equal demand.
That is to say:
Supply of means of production =
demand for means of production (to replace worn-out means and for
accumulation in the capitalist sectors):
Ιc + Ιv + Ιs + IIΙc + ΙΙΙvi
= Ιc + ΔΙc + ΙΙc + ΔΙΙc + ΙΙΙc + IVc (4)
Supply of means of consumption =
demand for means of consumption:
ΙΙc + ΙΙv + ΙΙs + IVc +
IVvi =
Ιv + Ιk + ΔΙv + ΙΙv + ΙΙk
+ ΔΙΙv + ΙΙΙvi + IVvi (5),
where Ιk,
ΙΙk denote individual consumption by capitalists in sectors I and
II.
We
accept the hypothesis that overall demand in every sector for means
of production and consumption is equal to the value of the gross
product of that sector:
Ιc + ΔΙc +
Ιv + Ιk + ΔΙv = Ιc + Ιv + Ιs (6),
ΙΙc + ΔΙΙc + ΙΙv + ΙΙk
+ ΔΙΙv = ΙΙc + ΙΙv + ΙΙs (7),
ΙΙΙc + ΙΙΙvi = ΙΙΙc +
ΙΙΙvi (8),
IVc + IVvi = IVc + IVvi
(9).
From (6) Ιk
+ ΔΙc + ΔΙv = Ιs (6i).
From (7) ΙΙk
+ ΔΙΙc + ΔΙΙv = ΙΙs (7i).
Given (6i), (7i) [(8) and (9)],
then (4) and (5) become:
Ιc + Ιv + Ιk + ΔΙc + ΔΙv
+ ΙΙΙc + ΙΙΙvi =
Ιc + ΔΙc + ΙΙc + ΔΙΙc +
ΙΙΙc + IVc (4i),
ΙΙc + ΙΙv + ΙΙk + ΔΙΙc
+ ΔΙΙv + IVc + IVvi =
Ιv + Ιk +
ΔΙv + ΙΙv + ΙΙk + ΔΙΙv + ΙΙΙvi + IVvi (5i).
From (4i) and
(5i) Ιv + Ιk + ΔΙv + ΙΙΙvi = ΙΙc
+ ΔΙΙc + IVc (10).
Relation (10)
is the (modified) condition for unimpeded reproduction for the
four-sector economy studied. Its similarities are obvious with the
condition for unimpeded reproduction of a pure capitalist economy as
analysed by Marx (see relation 3).
It is again a condition which
shows under what prerequisites expanded reproduction of the
capitalist sectors is possible in the case of simple reproduction of
the non-capitalist.
When this condition is
fulfilled, reproduction of the system is unimpeded. Accordingly, when
it is not fulfilled, its reproduction encounters an obstacle.
9. The condition for
unimpeded reproduction and “third persons”
We are now in the position to
demonstrate a final element concerning R. Luxemburg’s solution of
the “reproduction problem” by means of the “third persons”.
At this point we will accept the assumption that the expanded
reproduction in a pure capitalist economy is impossible owing to the
non-realization of that part of surplus value which is earmarked for
capitalization, as Luxemburg indicates. The point now is the
following: could the “third persons” resolve the problem?
We suppose
that in the process of expanded reproduction of a pure capitalist
economy there emerge a negative balance for the means of production
and a surplus of unsaleable means of subsistence, a hypothesis which
does not abstain from Luxemburg’s assumptions in her discussion of
Marx’s reproduction schemas (see Luxemburg [1913] 1968, chap. xxv,
esp. 337-38 ).ii
In this case we have:
Ιc + Ιv + Ιs < Ιc + ΔΙc
+ ΙΙc + ΔΙΙc (11)
IIc + IIv +IIs > Iv +Ik + ΔIv
+ IIv +ΔIIv + IIk (12).
We accept
also the hypothesis that the surplus value of each sector is equal to
the capitalists’ private consumption plus the additional constant
and variable capital for accumulation in that sector (which means
that the overall demand for means of production and consumption in
every sector is equal to the value of the gross product of that
sector). Thus relations (6) and (6i), (7) and (7i) remain unchanged:
Ιc + ΔΙc + Ιv + Ιk + ΔΙv
= Ιc + Ιv + Ιs (6),
ΙΙc + ΔΙΙc + ΙΙv + ΙΙk
+ ΔΙΙv = ΙΙc + ΙΙv + ΙΙs (7),
Ιk + ΔΙc + ΔΙv = Ιs
(6i)
ΙΙk + ΔΙΙc + ΔΙΙv = ΙΙs
(7i).
Given (6i) and (7i), (11) and
(12) become:
Ic + Iv + Ik +ΔIc +ΔIv < Ιc
+ ΔΙc + ΙΙc + ΔΙΙc (11i)
IIc +IIv + ΙΙk + ΔΙΙc +
ΔΙΙv > Iv +Ik + ΔIv + IIv + ΔIIv + IIk (12i).
From (11i)
and (12i) Iv +Ik +ΔIv < IIc + ΔIIc
(13).
Relation
(13) means that the net demand for means of consumption of the
capitalist sector I is smaller than the net supply of means of
consumption of the capitalist sector II and the net supply of means
of production of the capitalist sector I is smaller than the net
demand for means of production of the capitalist sector II.
Relation (13)
indicates thatunder
the given circumstances, the unimpeded reproduction of a pure
capitalist economy is impossible. To be possible, relation (3) {Ιv +
ΔΙv + Ιk =
ΙΙc + ΔΙΙc} ought to be fulfilled.
Accordingly,
for the unimpeded reproduction of a non-pure capitalist economy to be
possible, relation (10) {Ιv + Ιk + ΔΙv + ΙΙΙvi = ΙΙc + ΔΙΙc
+ IVc } ought to be fulfilled. If relation (10) is fulfilled when
relation (3) is fulfilled, then from
(3) and (10) we may conclude that:
IIIvi = IVc (14).
Given our previous analysis in
concern with relations (3), (8) and (9), it can be inferred that
relation (14) means that for the simple reproduction of the
non-capitalist sectors to be fulfilled, net demand of sector III for
means of consumption has to be equal to its net supply of means of
production and net demand of sector IV for means of production has to
be equal to its net supply of means of consumption or net demand for
means of consumption of the non-capitalist sector III has to be equal
to net supply of means of consumption of the non-capitalist sector IV
and net supply of means of production of the non-capitalist sector
III has to be equal to net demand for means of production of the
non-capitalist sector IV.
Relation
(14) means also that in the non-capitalist economy of sectors III and
IV theunimpeded
(simple) reproduction is possible {IIIc + IIIvi = IIIc + IVc and IVc
+ IVvi = IIIvi +IVvi}.
According to R. Luxemburg’s
affirmations, when relation (13) emerges instead of relation (3), it
is still possible to ensure the unimpeded reproduction of the system
as a whole by virtue of “third persons”.
In terms of our present
analysis this would be possible in the non-pure capitalist
(four-sector) system if:
IIIvi > IVc (15)
so that relation (10) would be
fulfilled.
Relation (15) means that the
net demand for means of consumption of the non-capitalist sector III
is higher than the net supply of means of consumption of the
non-capitalist sector IV and the net supply of means of production of
the non-capitalist sector III is higher than the net demand for means
of production of the non-capitalist sector IV. This means that the
non-capitalist economy (sectors III + IV) demands more means of
consumption than it produces (supplies) and produces (supplies) more
means of production than it demands. In other words, the negative
balance of the means of production and the surplus of the means of
subsistence in the capitalist economy are counterbalanced by the
positive balance of the means of production and the deficit of the
means of subsistence in the non-capitalist economy.
However,
this “solution” of the “reproduction problem” is
unsatisfactory: Considering that the “third persons” are simple
commodity producers, who aim at ensuring a certain level of
consumption by producing commodities of the same value as those they
consume (exchange of equivalences), then the output of non-capitalist
Sector III (and IV) must remain practically constant or change very
slowly over time. This means that, in the case in question, equation
(10) illustrates a condition of static equilibrium, which cannot be
kept in the long run, given the main assumption of underconsumption
theory, namely that the gap between the capitalist sectors’
production and consumption capacity (of consumer goods) tends
constantly to widen.iii
The above
mean that relation (15) is not sufficient to ensure the validity of
relation (10), which in the long run will be transformed to:
Iv +Ik
+ΔIv + IIIvi < IIc + ΔIIc + IVc (16).
Relation (16)
means that to the extent that unimpeded reproduction is impossible in
a pure capitalist economy to the same extent it is also impossible in
a non-pure one and vice-versa. The thesis of R. Luxemburg (and nearly
all underconsumption theorists) that the long run expanded
reproduction of capitalism is ensured by the consumption capacity of
“third persons” cannot be sustained.
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Notes
i
The authors express their thanks to the anonymous reviewers of
REMARX, whose comments and suggestions helped them to improve this
paper.
ii
We have to bear in mind that this assumption does not actually refer
to what Marxist theory describes as (general) overproduction, but
rather to a Classical partial overproduction (imbalance) scheme,
where the overproduction of one Sector is counterbalanced by the
underproduction of another (see Bukharin [1925]
1972,
221 ff.).
iii
As
Karl Kautsky had put it: “Although
capitalists increase their wealth and the number of exploited
workers grows, they cannot themselves form a sufficient market for
capitalist produced commodities, as accumulation of capital and
productivity grow even faster. They must find a
market in those strata and nations which are still non-capitalist.
They find this market, and expand it, but still not fast enough,
since this
additional market hardly has the flexibility and ability to expand
of the capitalist process of production.
(…) Thus, any
prosperity which results from a substantial expansion in the market
is doomed from the beginning to a short life,
and will necessarily end in a crisis” (quoted by Luxemburg, in
Luxemburg [1921]
1972, 79,
emphasis added).
Der Beitrag “Third Persons” and Reproduction: A Note to R. Luxemburg’s Critique of Marx’s Reproduction Schemes erschien zuerst auf non.copyriot.com.