Book Review: Grossman on capitalism’s contradictions

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by Michael Roberts

Henryk Grossman, Capitalism’s contradictions: studies in economic theory before and after Marx, edited by Rick Kuhn, published by Haymarket Books.

Rick Kuhn, the indefatigable editor, biographer and publisher of the writings of Henryk Grossman, has another book out on his work.  Grossman was an invaluable contributor to the development of Marxist political economy since Marx’s death in 1883.  An activist in the Polish Social Democrat party and later in the Communist party in Germany, Grossman, in my view, made major contributions in explaining and developing Marx’s theory of value and crises under capitalism.

Grossman established a much clearer view of Marx’s analysis, overcoming the confusions of the epigones, who either dropped Marx’s value theory for the mainstream bourgeois utility theory, or in the case of crises, opted for variants of pre-Marxist theories of underconsumption or disproportion.  In his works, Grossman weaved his way through these diversions, most extensively in his Law of Accumulation and the Breakdown of the Capitalist System in 1929. Grossman put value theory and Marx’s laws of accumulation and profitability at the centre of the cause of recurrent and regular crises under capitalism.

This book brings together essays and articles by Grossman that critiques the errors and revisionism of the Marxists who followed Marx and in so doing combats the apology of capitalism offered by mainstream (or what Grossman calls ‘dominant’) economics.  Rick Kuhn provides a short but comprehensive introduction on Grossman’s life and works, but also on the essence of the essays in the book.

They include an analysis of the economic theories of the Swiss political economist Simonde de Sismonde, who exercised a powerful influence on the early socialists who preceded Marx – and, for that matter, Marx himself.  Then there is a critical essay by Grossman on all the various ideas and theories presented by Marx’s epigones from the 1880s onwards; and two essays on the ideas of the so-called ‘’evolutionists’’, who tried to develop an alternative to the mainstream based on history and development rather than cold theory.  Their argument was the capitalism was changing and developing away from competition and harmonious growth into monopoly, stagnation and inequality. 

But, as Grossman says, Marx too recognised these trends but only he could provide a theoretical explanation of why, based on his laws of accumulation (p250).  Change, time and dynamics as opposed to equilibrium, simultaneity and statics is a big theme of Grossman’s exposition of Marxist economics and that is why the chapter on classical political economy and dynamics in the book is the most important, in my view.

But let me highlight the key conclusions that come out of Grossman’s essays that Rick Kuhn also identifies.  Marx considered that one of his greatest contributions to understanding capitalism was the dual nature of value.  Things and services are produced for use by humans (use value), but under capitalism, they are only produced for money (exchange value).  This is the driver of investment and production – value and, in particular, surplus value.  And both use and exchange value are incorporated into a commodity for sale.  But this dual nature of the value also exposes capitalism’s weakness and eventual downfall.  That is because there is an irreconcilable contradiction between production for use and for profit (between use value and exchange value), which leads to regular and recurring crises of production of increasing severity.

As Grossman shows, Sismondi was aware of this contradiction, which he saw as one between production and consumption.  But he did not see, as Marx did, the laws of motion in capitalism, from the law of value to the law of accumulation and finally to the law of the tendency of the rate of profit to fall, that reveal the causes of crises of overproduction.

The vulgar economists of capitalism have tried to deny this contradiction of capitalist production ever since it was hinted at by the likes of Sismondi, and logically suggested by the law of value based on labour, first proposed by Adam Smith and David Ricardo. The apologists dropped classical theory and turned to a marginal utility theory of value to replace the dangerous labour theory.  They turned to equilibrium as the main tendency of modern economies and they ignored the effect of time and change.  Only the market and exchange became matters of economic analysis, not the production and exploitation of labour.

But as Kuhn points out that “economic processes involve not just the circulation of commodities but their production as use values.  The duration of the periods of production and even the circulation of different commodities vary.  Their coincidence if it occurs at all, can only be accidental.  Yet vulgar economics simply assumes such coincidence or simultaniety of transactions.  It cannot theoretically incorporate time and therefore history.” p17.

Marx’s analysis destroys the idea that all can be explained by exchange and markets.  You have to delve beneath the surface to the process of production, in particular to the production of value (use value and exchange value).  As Grossman puts it: “Marx emphasises the decisive importance of the production process, regarded not merely as a process of valorisation but at the same time a labour process… when the production process is regarded as a mere valorisation process – as in classical theory – it has all the characteristics of hoarding, becomes lost in abstraction and is no longer capable of grasping the real economic process.” p156.

In my view, Grossman makes an important point in emphasising that the production of value is the driving force behind the contradictions in capitalism not its circulation or distribution, even as these are an integral part of the circuit of capital, or value in motion.  This issue of the role of production retains even more relevance in debates on the relevant laws of motion of capitalism today, given the development of ‘financialisation’ and the apparent slumber of industrial proletariat.

In the chapter on dynamics, Grossman perceptively exposes the failure of mainstream theories which are based on static analysis.  Such theories lead to the conclusion that crises are just shocks to an essentially tendency towards equilibrium and even a stationary state – something that Keynes too accepted.  Capitalism is not gradually moving on (with occasional shocks) in a generally harmonious way towards superabundance and a leisure society where toil ceases – on the contrary it is increasingly driven by crises, inequality and destruction of the planet.

It is the “incongruence” between the value side and the material side of the process of reproduction that is the key to the disruption of capitalist accumulation.  There is no symmetry as the mainstream thinks. The value of individual commodities tends to fall while the mass of material goods increases. Here is the essence of the transitional nature of capitalism as expressed in Marx’s ”dual” value theory and the law of profitability.