[OPE-L] Grossman on world trade

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Mon Aug 07 2006 - 17:55:14 EDT

Dear Paolo,
here is the message on the world market from last year. I am most interested
in a counter-criticism.

At 3:19 AM +0200 10/10/05, Michael Heinrich wrote:
>  What Marx excludes from
>his presentation in "Capital" is the "competition on the world market"
>respectivly (in Hannos quotation) the "actual movement of competition",
>what is also related to the world market as the first sentence makes
>clear. In both passages Marx didn't exclude  a n y  competition from his
>presentation, but the "actual competition", which takes place on the
>world market.

Michael H seems to be repeating Luxemburg's and 
Sternberg's false charge that Marx excluded 
analysis of the world market from his magnum 
opus, making it only
a torso of a work.

Grossmann long ago invalidated the claim.

For example, he wrote:

Yet Marx himself repeatedly underlined the 
colossal importance of foreign trade to the 
development of capitalism; in 1859 he proposed a 
six-book structure for his investigations of the 
capitalist economy and intended the 'world 
market' to be one of the six. Although the 
structure of the work was later changed, its 
object of inquiry remained basically the same. In 
Capital we find the 'creation of the world 
market' listed as one of the 'three cardinal 
facts of capitalist production' (1956, p. 266). 
Elsewhere Marx writes: 'Capitalist production 
does not exist at all without foreign commerce' 
(1956, p. 474). And:

it is only foreign trade, the development of the 
market to a world market, which causes money to 
develop into world money and abstract labour into 
social labour ... Capitalist production rests on 
the value or the transformation of the labour 
embodied in the products into social labour. But 
this is only [possible] on the basis of foreign 
trade and of the world market. This is at once 
the precondition and the result of capitalist 
production. (Marx, 1972, p. 253)

So what scientific value can there be in a 
theoretical system which abstracts from the 
decisively important factor of foreign trade?

People have tried to escape the problem by 
postulating a gap in Marx's system; they have 
argued that after all Capital is an unfinished 
work. Thus A Parvus argues that the founders of 
scientific socialism 'died much too early' (1901, 
p. 587) to leave us any analysis of trade policy. 
Recently A Meusel has argued that Marx was 
naturally less interested in problems of foreign 
trade because the only significant foreign trade 
controversy which he lived to see, the struggle 
for the abolition of the Corn Laws, appeared to 
be a conflict between the landed aristocracy and 
the industrial middle class; 'it was easy to 
suppose that the working class had no immediate 
strong interests of its own in policies relating 
to foreign trade' (Meusel, 1928, p. 79). This 
distortion explains why Meusel cannot grasp the 
tremendous importance of foreign trade in Marx's 
work, even though this is repeatedly and 
emphatically drawn out in Capital and Theories of 
Surplus Value. Luxemburg also starts from the 
conception that Marx ignored foreign trade in his 
system, that 'he himself explicitly states time 
and again that he aims at presenting the process 
of accumulation of the aggregate capital in a 
society consisting solely of capitalists and 
workers' (1968, pp. 330-1). Luxemburg could only 
explain this by postulating a gap in Marx's work, 
supposedly due to the fact that 'this second 
volume [of Capital] is not a finished whole but a 
manuscript that stops short half way through' 
(pp. 165-6). Luxemburg then constructs a theory 
to fill in the so-called gap. This may be a 
convenient way of disposing of theoretical 
problems but it shatters the underlying unity of 
the system and creates a hundred new problems.[2]

What Luxemburg sees as a gap in Marx's system is 
transformed by Sternberg into its basic 
limitation. Marx turns out to be a builder of 
completely abstract systems which were bound to 
lead to untenable conclusions insofar as they 
ignored the basic aspects of reality. He says 
that 'Marx analysed capitalism on an assumption 
that has never corresponded with reality, namely 
that there is no non-capitalist sector' (1926, p. 
303). Whereas Luxemburg at least regarded Marx's 
whole system as a solid achievement of theory, 
Sternberg informs us that the whole system is a 
delapidated structure. He states that Luxemburg 
'broke off too soon' in her demolition of Marx's 
system. She 'failed to see that every stone of 
the structure is affected by the fact of the 
existence of a non-capitalist sector, not only 
the accumulation of capital but crisis, the 
industrial reserve army, wages, the workers' 
movement and, above all, the revolution' (p. 9). 
So all these basic questions of Marxist theory 
are tackled incorrectly because Marx built his 
system on the unproven and improbable assumption 
that there are no non-capitalist countries.

The grotesque character of this entire exposition 
is obvious. It is the product of a whole 
generation of theoreticians who go straight for 
results without any philosophical background, 
without bothering to ask by what methodological 
means were those results established and what 
significance do they contain within the total 
structure of the system. Sternberg writes a book 
of over 600 pages simply to register the 
observation that Marx described only pure 
capitalism, isolated from external trade 
relations. Because Marx never ordered the various 
passages dealing with foreign trade under 
capitalism into a single, structured chapter, 
these passages are totally ignored. This is a sad 
proof of the decline of the capacity to think 

The function of foreign trade under capitalism

The importance of foreign trade for the increasing multiplicity of use values

The progress of capitalism increases the mass of 
surplus product accruing to capital. The number 
of human needs is unlimited and when people have 
enough of some products there are always others 
which they can use. Towards the middle of the 
last century people consumed a greater variety of 
products than fifty years earlier, and today this 
variety is greater still.

Foreign trade plays an important role in 
expanding this multiplicity of products. Here 
what matters is international exchange as such, 
regardless of whether it takes place with 
capitalist or non-capitalist ones. By increasing 
the multiplicity of products foreign trade has 
the same impact as product diversification on the 
home market. An increasing variety of use values 
facilitates accumulation and weakens the 
breakdown tendency. Marx says:

If surplus labour or surplus value were 
represented only in the national surplus product, 
then the increase of value for the sake of value 
and therefore the exaction of surplus labour 
would be restricted by the limited, narrow circle 
of use values in which the value of the 
[national] labour would be represented. But it is 
foreign trade which develops its [the 
surplusproduct's] real nature by developing the 
labour embodied in it as social labour which 
manifests itself in an unlimited range of 
different use values, and this in fact gives 
meaning to abstract wealth. (1972, p. 253)

Thus the limits on the production of surplus 
value are extended; the breakdown of capitalism 
is postponed.

This aspect of the exchange relationship does not 
exhaust the problem of foreign trade and its 
impact on the tendencies of capitalism. Looking 
at the matter from the value side, I have shown 
that the problem of breakdown by no means lies in 
an excess of surplus value but in its opposite, a 
lack of sufficient valorisation. Therefore we 
have to examine foreign trade from the aspect of 
its impact on valorisation.

Expansion of the market as a means of reducing 
the costs of production and circulation

To understand why foreign trade and market 
expansion are important we do not need to fall 
back on the metaphysical theory of the 
realisation of the surplus value. Their 
importance is more obvious. Hilferding argues:

the size of the economic territory ... has always 
been extremely important for the development of 
capitalist production. The larger and more 
populous the economic territory, the larger the 
individual plant can be, the lower the costs of 
production, and the greater the degree of 
specialisation within the plant, which also 
reduces costs of production. The larger the 
economic territory, the more easily can industry 
be located where the natural conditions are most 
favourable and the productivity of labour its 
highest. The more extensive the territory, the 
more diversified is production and the more 
probable it is that the various branches of 
production will complement one another and that 
transport costs on imports from abroad will be 
saved. (1981, p. 311)

Due to mass production British industry, which 
was the workshop of the world down to the 1870s, 
could carry through a division of labour, 
increases in productivity and cost savings to a 
level that was unattainable elsewhere. Whereas 
weaving and spinning were originally 
combined,later they were separated. This resulted 
in geographical specialisation. Burnley made the 
traditional calico prints, Blackburn clothed 
India and China, Preston manufactured fine 
cottons. The factory districts lying close to 
Manchester concentrated on more complicated 
fabrics, like the cotton velvets of Oldham and 
high quality calicoes of Ashton and Glossop. Only 
mass production of this kind made possible the 
construction of specialised machines for 
individual operations, and this meant important 
savings in investment and enterprise costs.

Manchester, previously the centre of the 
industry, more and more specialised as the 
exclusive base of the export trade. In the 
basements of the city's commercial firms, which 
were often several stories underground, steam 
engines and hydraulic presses were reducing 
cotton yams and fabrics to half their thickness.

Such a high level of production specialisation 
meant huge cost reductions due to savings in 
non-productive expenses, reduced work 
interruptions and increases in productivity and 
the intensity of labour. Economies in production 
are supplemented by economies in the sphere of 
circulation. The number of importers, brokers and 
so on is compressed to the absolute minimum. An 
intricate system of transport connects supply 
bases to centres of production. Special credit 
organisations emerge with their own terms of 
payment. All of this enhances valorisation by 
reducing the costs of investment, manufacturing 
and marketing. This is what accounted for the 
competitive superiority of British capitalism.

The compulsion to produce the greatest possible 
surplus value is enough to account for the 
enormous importance of market expansion and 
struggles for markets. We do not need to fall 
back on Luxemburg's notion of the necessity of 
non-capitalist markets for realising surplus 
value. In fact it is irrelevant whether the 
markets in question are capitalist or not., What 
matters is mass outlets, mass production and the 
specialisation and rationalisation of work and 
circulation which mass production makes possible. 
It makes no difference whether German chemicals 
are exported to Britain or to China.

Finally the specialisation and geographical 
concentration of production in specific lines 
contributes to the training of a highly efficient 
workforce, and therefore to increases in the 
skill and intensity of labour. A German worker 
cited by Schulze-Gaevernitz talks of German 
workers being less efficient than British workers 
due to lack of tradition, in the sense that in 
Britain workers have acquired a basic experience 
in handling machinery through specialised work 
lasting over generations. The result is that in 
Britain three or four workers can operate 1 000 
spindles whereas in Germany at that time it 
needed six to ten (1892, p. 109).

We should add that France for example, which 
possesses an old and flourishing silk industry at 
Lyons, remained totally dependent on Britain for 
her imports of raw silk from China and Japan. All 
attempts to procure Chinese silk directly, with 
the help of French banks, failed because Britain 
was able to buy the silk more cheaply due to her 
extensive trade connections and lower freight 
costs. In addition despite the double freight 
costs involved in importing the raw material all 
the way from Australia and shipping the final 
product back there, British woollens remain 
cheaper and more competitive than Australian 
woollens because the size of the Australian 
market forces the individual units there to 
diversify instead of specialising. Domestic 
prices are higher than world market prices, sales 
are confined exclusively to the home market and 
this means that protection is necessary. The same 
holds for the woollen industries of La Plata 
(Argentina) and South Africa, although wool is 
directly available there andthis dispenses with 
double transport costs.

All this explains why the USA has emerged as an 
increasingly more dangerous competitor on the 
world market. The enormous advantages of a large 
and integrated scale of operations, in 
territorial terms, gives American industry 
completely different possibilities of expansion 
than those available in Europe.

Mass production and mass sales have always been 
basic objectives of capitalist production. But 
they have become matters of life and death for 
capitalism only in the late stage of capital 
accumulation when a purely domestic valorisation 
of the gigantic mass of capital becomes more and 
more difficult. Mass production is necessary to 
obtain the various advantages of specialisation 
which are inseparable from mass production. It is 
also necessary for achieving a level of 
competitive superiority on the world market. 
Politically mass production means the triumphant 
domination of the large-scale enterprise over the 
small and medium enterprises. It explains the 
tendency to form transnational empires in place 
of the nation state. The categories in terms of 
which we think today are no longer those of 
nation states but of entire continents.

Foreign trade and the sale of commodities at 
prices of production deviating from values

Among the simplifying assumptions of the 
reproduction scheme an especially important role 
is played by the assumption that commodities 
exchange at value; that is, that their prices 
coincide with their values. This is only possible 
if we abstract from competition and suppose that 
all that happens in circulation is that one 
commodity of a given value is exchanged against 
another of the same value. But in reality 
commodities do not exchange at their values. Such 
an assumption has to be dropped and the 
conclusions established on that basis further 

What sort of modifications are required? Up to 
now this problem has always been examined from 
the standpoint of the transfer of value among 
capitalists - a social process in which the 
prices of production of individual commodities 
differ from their values but on the basis of 
total price remaining equal to total value. No 
one has systematically tackled the problem of the 
deviation of prices from values in international 
exchange or related this problem to the overall 
structure of Marx's system. For instance 
Hilferding and the followers of Kautsky were in 
no position to grasp the elements of novelty in 
Marx's treatment of this problem as long as they 
were mainly interested in rejecting the theory of 
breakdown. This likewise precluded any deeper 
analysis of the function of foreign trade under 

If like Ricardo, we suppose that the law of value 
is directly applicable to international trade 
then the question of foreign trade has no bearing 
on the problem of value and accumulation. On this 
assumption foreign trade simply mediates the 
exchange of use values while the magnitude of 
value and profit remains unaltered. In contrast 
Marx draws out the role of competition in 
international exchange.

If we look at the sphere of production it follows 
that the economically backward countries have a 
higher rate of profit, due to their lower organic 
composition of capital, than the advanced 
countries. This is despite the fact that the rate 
of surplus value is much higher in the advanced 
countries and increases even more with the 
general development of capitalism and the 
productivity of labour. Marx (1959, pp. 150-1) 
gives an example where the rate of surplus value 
is 100 per cent in Europe and 25 per cent in Asia 
while the composition of the respective national 
capitals is 84c +16v for Europe and 16c + 84v for 
Asia. We get the following results for the value 
of the product


16c + 84v + 21s = 121. Rate of profit 21/100 = 21 per cent


84c + 16v + 16s = 116. Rate of profit 16/100 = 16 per cent

International trade is not based on an exchange 
of equivalents because, as on the national 
market, there is a tendency for rates of profit 
to be equalised. The commodities of the advanced 
capitalist country with the higher organic 
composition will therefore be sold at prices of 
production higher than value; those of the 
backward country at prices of production lower 
than value. This would mean the formation of an 
average rate of profit of 18.5 per cent so that 
European commodities will sell for a price of 
118.5 instead of 116. In this way circulation on 
the world market involves transfers of surplus 
value from the less developed to the more 
developed capitalist countries because the 
distribution of surplus value is determined not 
by the number of workers employed in each country 
but by the size of the functioning capital. Marx 
slates that through foreign trade:

three days of labour of one country can be 
exchanged against one of another country ... Here 
the law of value undergoes essential modification 
... The relationship between labour days of 
different countries may be similar to that 
existing between skilled, complex labour and 
unskilled simple labour within a country. In this 
case, the richer country exploits the poorer one, 
even where the latter gains by the exchange. 
(1972, pp. 105-6)

In effect price formation on the world market is 
governed by the same principles that apply under 
a conceptually isolated capitalism. The latter 
anyway is merely a theoretical model; the world 
market, as a unity of specific national 
economies, is something real and concrete. Today 
the prices of the most important raw materials 
and final products are determined 
internationally, in the world market. We are no 
longer confronted by a national level of prices 
but a level determined on the world market. In a 
conceptually isolated capitalism entrepreneurs 
with an above average technology make a surplus 
profit (a rate of profit above the average) when 
they sell their commodities at socially average 
prices. Likewise on the world market, the 
technologically advanced countries make a surplus 
profit at the cost of the technologically less 
developed ones. Marx repeatedly draws out the 
international effects of the law of value. For 
instance he says, 'most agricultural peoples are 
forced to sell their product below its value 
whereas in countries with advanced capitalist 
production the agricultural product rises to its 
value' (1969, p. 475). In Chapter 22 of Capital 
Volume One entitled 'national differences in 
wages', Marx writes:

the law of value in its international application 
is ... modified by this, that on the world market 
the more productive national labour reckons also 
as more intense, so long as the more productive 
nation is not compelled by competition to lower 
the selling price of its commodities to the level 
of their value. (1954, p. 525)

With the development of capitalist production in 
a given country therefore, the national intensity 
and productivity of labour rise above the 
international average level.

The different quantities of commodities of the 
same kind, produced in different countries in the 
same working time, have, therefore, unequal 
international values, which are expressed in 
different prices, ie, in sums of money varying 
according to international values. The relative 
value of money will, therefore, be less in the 
nation with a more developed capitalist mode of 
production, than in the nation with a less 
developed. (p. 525)

Likewise in Chapter 17:

the intensity of labour would be different in 
different countries, and would modify the 
international application of the law of value. 
The more intense working day of one nation would 
be represented by a greater sum of money than the 
less intense day of another nation. (p.492)

Finally in Capital Volume Three:

Capitals invested in foreign trade can yield a 
higher rate of profit, because, in the first 
place, there is competition with commodities 
produced in other countries with inferior 
production facilities, so that the more advanced 
country sells its goods above their value even 
though cheaper than the competing countries. In 
so far as the labour of the more advanced country 
is here realised as labour of a higher specific 
weight, the rate of profit rises, because labour 
which has not been paid as being of a higher 
quality, is sold as such ... As regards capitals 
invested in colonies, etc, on the other hand, 
they may yield higher rates of profit for the 
simple reason that the rate of profit there is 
higher due to backward development, and likewise 
the exploitation of labour, because of the use of 
slaves, coolies, etc. (1959, p. 238)

In the examples cited above the gain of the more 
advanced capitalist countries consists in a 
transfer of profit from the less developed 
countries. it is irrelevant whether the latter 
are capitalist or non-capitalist. It is not a 
question of the realisation of surplus value but 
of additional surplus value which is obtained 
through competition on the world market through 
unequal exchange, or exchange of non-equivalents.

The enormous significance of this transfer 
process and the function of imperialist expansion 
are only explicable in terms of the theory of 
breakdown developed earlier. I have already shown 
that capitalism does not suffer from a 
hyperproduction of surplus value but, on the 
contrary, from insufficient valorisation. This 
produces a tendency towards breakdown which is 
expressed in periodic crises and which in the 
further course of accumulation necessarily leads 
toa final collapse.

Under these circumstances an injection of surplus 
value by means of foreign trade would raise the 
rate of profit and reduce the severity of the 
breakdown tendency. According to the conception I 
have developed and which, I believe, is also 
Marx's conception, the original surplus value 
expands by means of transfers from abroad. At 
advanced stages of accumulation, when it becomes 
more and more difficult to valorise the 
enormously accumulated capital, such transfers 
become a matter of life and death for capitalism. 
This explains the virulence of imperialist 
expansion in the late stage of capital 
accumulation. Because it is irrelevant whether 
the exploited countries are capitalist or 
non-capitalist - and because the latter can in 
turn exploit other less developed countries by 
means of foreign trade - accumulation of capital 
at a late stage entails intensified competition 
of all capitalist countries on the world market. 
The drive to neutralise the breakdown tendency 
through increased valorisation takes place at the 
cost of other capitalist states. The accumulation 
of capital produces an ever more destructive 
struggle among capitalist states, a continuous 
revolutionisation of technology, rationalisation, 
Taylorisation or Fordisation of the economy - all 
of which is intended to create the kind of 
technology and organisation that can preserve 
competitive superiority on the world market. On 
the other side accumulation intensifies the drift 
to protectionism in the economically backward 

Kautsky sees the essence of imperialism in a 
striving to conquer the non-capitalist agrarian 
parts of the world. He therefore sees imperialism 
as merely an episode in the history of capitalism 
that will pass with the industrialisation of 
those parts of the world. This conception is 
totally false. Imperialism must be understood in 
the specific form that Luxemburg gives to it in 
her theory of the role of the non-capitalist 
countries. Imperialist antagonisms subsist even 
among the capitalist states in their relations to 
one another. Far from being merely an episode 
that belongs to the past, imperialism is rooted 
in the essence of capitalism at advanced stages 
ofaccumulation. Imperialist tendencies become 
stronger in the course of accumulation, and only 
the overthrow of capitalism will abolish them 

The argument developed here shows how foreign 
trade can function as a means of surmounting 
crises. While commodity exports are not confined 
to periods of crisis or depression it is a fact 
that in boom periods, when the level of domestic 
prices is high and shows an upward trend, 
accumulation in individual spheres of industry 
creates a market for industry as a whole, and 
industry works mainly for the national market. 
Foreign trade gains importance in periods of 
internal saturation, when valorisation disappears 
due to overaccumulation and there is a declining 
demand for investment goods. The drive to export 
in a period of depression acts as a valve for 
overproduction on the domestic market. In Germany 
after the boom year of 1927 there was a tapering 
off early in 1928. Although a depression has 
still to come there was, in the first four months 
of 1928, a retreat in domestic demand practically 
all along the line. At the same time however, 
exports provided a compensation. From January to 
April 1928 exportswere around 18.5 per cent 
higher than in the corresponding part of the 
previous year. Thus here we have a means of 
partially offsetting a crisis of valorisation in 
the domestic economy.

The international character of economic cycles

Far from signifying the impending doom of 
European capitalism, as Hildebrand (1910) and 
others forecast, the industrialisation of the 
more backward countries signifies an expansion of 
world exports. Contrary to Luxemburg's theory the 
backward countries gain importance as markets for 
advanced capitalism precisely to the degree that 
they industrialise. Today the industrialising 
colonies are much better markets than the purely 
agricultural colonies, while the advanced 
capitalist countries are the best markets. In 
fact the notion that the backward countries, 
still mainly dependent on agriculture, could 
produce enough commodities to pay for the 
colossal wealth of the capitalist nations is 
something bordering on absurdity.

The fact that the more industrialised a country 
is the greater its share of industrial imports, 
or the fact that the industrialised nations form 
the best markets for each other, helps to explain 
a phenomenon for which Luxemburg's theory has no 
explanation. I mean the international character 
of the economic cycle. An upswing in production 
goes together with rising imports of raw 
materials, semi-finished goods and soon. In 
periods of boom net exports of raw materials and 
semi-finished goods exceed net exports of 
finished commodities, while the ratio is reversed 
in periods of depression. Thus there is a strong 
correlation between booms and raw material 

A boom in one country is communicated to other 
countries through the medium of commodity 
imports. In this way the rhythm of boom movements 
becomes progressively synchronised, even if 
international differences in the chronology of 
the business cycle persist. Even prior to the War 
we saw the gradual formation of a parallelism in 
the economic cycles of the most important 
countries. The crises of 1900, 1907 and 1913 all 
had an international character. This parallelism 
was interrupted by the War and the breaking off 
of mutual economic ties, but after the War it 
started to crystallise once more.
Table 3.1: German imports 1925-7 (billions of marks)




Raw materials & semi-finished goods




Finished goods




The minor boom of 1925 was followed by the 
depression of 1926 when the total volume of 
imports declined steeply. In the boom year of 
1927 imports exceeded the level of 1925. It is 
easy to see that such a rapid increase of German 
imports, by 3.2 billion marks, is bound to have 
an invigorating effect on the world market. As 
long as it is sufficiently strong the boom in a 
single country can communicate itself to all its 
trade partners. For instance the German boom of 
1927 drew along with it all the neighbouring 
countries of central and eastern Europe which 
have close economic ties to Germany. In that year 
there was a revival, of varying strength, in 
Poland, Czechoslovakia, Austria, Hungary, 
Switzerland, Belgium, Netherlands, Sweden and 

In periods of depression things are reversed. 
Imports decline and a chain repercussion starts 
as orders are cancelled.

Foreign trade and world monopolies

The tremendous importance of cheap raw materials 
to the level of the rate of profit and thus to 
the valorisation of capital was first established 
through practical experience. However the 
classical economists found it difficult to 
explain the fact theoretically due to their 
confusion of the rate of profit with the rate of 
surplus value. Marx was the first to establish 
the connection clearly through his own exposition 
of the laws that govern the rate of profit:

Since the rate of profit is s/C, or s/c + v, it 
is evident that everything causing a variation in 
the magnitude of c, and thereby of C, must also 
bring about a variation in the rate of profit, 
even ifs and v, and their mutual relation, remain 
unaltered. Now, raw materials are one of the 
principle components of constant capital ... 
Should the price of raw material fall ... the 
rate of profit rises ... Other conditions being 
equal, the rate of profit, therefore, falls and 
rises inversely to the price of raw material. 
This shows, among other things, how important the 
low price of raw material is for the industrial 
countries. (1959, p. 106)

Marx goes on to point out that the importance of 
raw materials to the level of profitability is 
constantly growing with the development of 
capitalist industry:

the quantity and value of the employed machinery 
grows with the development of labour productivity 
but not in the same proportion as productivity 
itself, ie, not in the proportion in which this 
machinery increases its output. In those branches 
of industry, therefore, which doconsume raw 
materials ... the growing productivity of labour 
is expressed precisely in the proportion in which 
a larger quantity of raw material absorbs a 
definite of labour, hence in the increasing 
amount of raw material converted in, say, one 
hour into products ... The value of raw material, 
therefore, forms an ever-growing component of the 
value of the commodity product. (1959, p. 108)

The growing importance of raw materials is also 
obvious in the fact that as industrialisation 
advances every capitalist country becomes 
increasingly dependent on raw material imports. 
For instance in Germany imports of raw materials 
for industrial purposes increased by between 40 
to 55 per cent between the late 1880s and 1912.

A further point is that monopolistic controls in 
the world market are easier to carry through in 
the sphere of raw materials where the range of 
possible applications is very wide. Competition 
among the capitalist powers first exploded in the 
struggles to control raw material resources 
because the chance of monopoly profits were 
greatest here. Yet this is not the only factor. 
Control over raw materials leads to control over 
industry as such. F Kestner says:

Because only raw materials or means of production 
are susceptible to long-term monopolisation, 
which is generally not the case with finished 
products - unless raw material syndicates 
intervene - cartelisation necessarily shifts the 
economic balance in favour of heavy industry, 
both in terms of price formation, and in terms of 
the fact that the processing industries fall 
under the sway of the raw materials industries. 
(1912, p. 258)

The struggle for control of raw materials is thus 
a struggle for control over processing 
industries, which is itself finally reducible to 
the drive for additional surplus value. Because 
raw materials are only found at specific points 
on the globe, capitalism is defined by a tendency 
to gain access to, and exert domination over, the 
sources of supply. This can only take the form of 
a division of the world. A world monopoly in raw 
materials means that more surplus value can be 
pumped out of the world market. For competitors 
who face such a monopoly it means that the 
breakdown of capitalism is intensified. The 
economic roots of imperialism, of the incessant 
drive to dominate territories capitalistically 
and later politically, lie in imperfect 

Perhaps the most obvious case of this is the 
Anglo-American struggle over oil. The struggles 
for petroleum in the Caucasus, Mesopotamia and 
Persia are already well known so I shall be brief 
here. Oil first became a burning issue for 
Britain when the discovery of the diesel-engine 
made it possible to substitute liquid fuel for 
coal in shipping. Yet the biggest reserves of 
crude oil and the bulk of oil production were 
concentrated in American hands. Britain saw the 
American monopoly as a threat. F Delaisi points 
out that for close to a century the whole power 
of British trade and industry was founded on her 
control over coal. Superiority in the coal 
market, and especially in the production of 
bunker coal, enabled Britain to consolidate its 
traditional maritime dominance. Britain could 
afford to charge cheaper rates on return-freight 
than her competitors:

Thus commodities destined for Britain paid lower 
transport costs than those destined for other 
countries. Hence British industry enjoyed a real 
premium on all overseas raw materials. This was 
an enormous advantage over all competitors in the 
struggle to win international markets. (Delaisi, 
1921, p.40)

Once shipping converted to oil all this could 
change. Britain produced no petroleum. British 
domination over sea transport was seriously 
threatened. Then there was the experience of the 
World War which showed the importance of 
automobiles and aircraft. The decisive strategic 
significance of allied control over oil reserves 
became more and more obvious the longer the War 
lasted. The oil politics of the postwar period 
was a direct consequence of these experiences.

Britain realised the implications of this 
situation quite early on and, at the beginning of 
this century, quietly and unobtrusively started 
to acquire reserves of oil that were still going. 
Against Rockefeller's Standard Oil Trust, Britain 
founded a series of oil trusts: Royal Shell 
(later expanded into Royal Dutch Shell), Mexican 
Eagle, Anglo-Persian Oil, etc. Britain even 
settled down in the USA to take on the 
competition of Standard Oil. By 1919 The Times 
could report a speech by G Prettyman, a 
well-known oil expert, who on the inauguration of 
the new Anglo-Persian refinery was quoted as 

At the outbreak of the War the position was such 
that the British Empire with her enormous 
worldwide interests controlled only two per cent 
of world petroleum reserves ... On the currently 
prevalent foundations and methods of work used, 
about which he would not like to go into detail, 
he feels that once differences are settled, the 
British Empire should not be very far from 
controlling over half the world's known reserves 
of petroleum. (7 May 1919)

This result could be achieved thanks to a 
powerful vertical concentration of the entire 
industry from production down to distribution, 
and the corresponding conglomeration of capital 
which could exert fantastic pressure.

The British oil industry was thus welded together 
into a single block which today embraces 90 per 
cent of all Britain's oil interests. At the end 
of 1920 Anglo-Persian Oil unified some 77 
companies with a nominal capital of around 120 
million, and Royal Dutch Shell 50 firms with 300 
million. Apart from these, there were another 177 
companies representing a capital of 266 million. 
Altogether these firms represent a total capital 
of 686 million; 52 per cent of this is invested 
in production, 16 per cent in trade, 12 per cent 
in transport and 11 per cent in refining.

What was the point of this huge effort? Military 
security is only part of the answer. Delaisi 
notes that 'Britain no longer needs to fear the 
American monopoly' (p. 58). Just prior to the War 
Britain controlled all the most important coal 
stations. For the future it sought to control the 
major oil stations through a tightly organised 
petroleum industry. One of the basic objectives 
of Britain's oil strategy was to attain a near 
monopoly over the transportation of oil. How far 
this succeeded can be gauged from a report in The 
Times of March 1920, cited by Delaisi, which 
quotes Sir Edgar Mackay as saying:

I can say that two thirds of the fields in 
operation in Central and South America are in 
British hands ... The Shell group controls 
interests in all the important oilfields on 
earth, including those in the USA, Russia, Dutch 
East Indies, Rumania, Egypt, Venezuela, Trinidad, 
British India, Ceylon, the Malay States, north 
and south China, Siam, the Straits Settlements 
and the Philippines. (Delaisi, 1921, p. 64)

The economic significance was drawn out when Mackay said:

Assuming their current curve of consumption rises 
further, then after ten years the United States 
will have to import 500 million barrels a year 
which makes, even supposing a very low price of 
$2 per barrel, an annual expenditure of $1 
billion, and most of that, if not all, will go 
into British pockets. (p. 64)

The idea of joint international control over raw 
material resources has been mooted time and time 
again. Even the International Congress of 
Mineworkers, which took place in August 1920, 
formulated a resolution calling for the creation 
of a central international office in the League 
of Nations. Such an office would not only produce 
a detailed inventory of all existing resources 
and gather statistics on them; it would also look 
after the 'distribution of fuels, minerals and 
other raw materials'. Such proposals are utopian. 
I have already shown that the antagonisms of 
world economy find their deepest source in the 
lack of valorisation which goes together with the 
general advance of accumulation. A shortage of 
surplus value in one national economy can only be 
compensated at the expense of other economies. 
Even capitalist attempts to create joint world 
monopolies have ended in failure, due to 
irreconcilable interests among the various 

The conflict of interests remains the basic 
aspect in the sense that the whole function of 
world monopolies lies in the national enrichment 
of some economies at the cost of others. As a 
result the increasingly frequent projects to 
evolve joint control and distribution schemes for 
raw materials remain pious wishes. Marx already 
pointed out, with prophetic foresight, that the 
attempts to regulate production that are often 
discernible in periods of crisis vanish:

as soon as the principle of competition again 
reigns supreme ... All thought of a common, 
all-embracing and far-sighted control over the 
production of raw materials gives way once more 
to the faith that demand and supply will mutually 
regulate one another. And it must be admitted 
that such control is on the whole irreconcilable 
with the laws of capitalist production and 
remains for ever a pious wish, or is limited to 
exceptional cooperation in times of great stress 
and confusion. (1959, p. 120)

The function of capital exports under capitalism

Earlier presentations of the question

From a scientific point of view we have to
explain why capital is exported and what role is 
played by the export of capital in the productive 
mechanism of the capitalist economy.

Sombart is the best example of the superficial 
way in which these problems are handled in the 
prevailing theories. He tells us: 'No one can 
doubt that economic imperialism basically means 
that by enlarging their sphere of political 
influence, the capitalist powers are enabled to 
expand the sphere of investment for their 
superfluous capital' (1927, p. 71). Here the 
relation between capital expansion and the drive 
for power is wrongly described; Sombart makes the 
drive for power the precondition for capital 
expansion. The opposite is the case - capital 
expansion is a precursor of the political 
domination that follows.

Secondly, from a purely economic point of view, 
Sombart does not explain why there is such a 
thing as the expansion of capital to foreign 
territories. This is something self-evident for 
him. What we have to explain theoretically is 
simply presupposed as obvious without any 
analysis or proof. Why are capitals not invested 
in the home country itself? Because they are 
superfluous? But what does superfluous mean? 
Under what conditions can a capital become 
superfluous? Sombart simply uses phrases without 
the slightest attempt to clarify things 

This issue has been debated for a whole century 
ever since Ricardo argued that when 'merchants 
engage their capitals in foreign trade, or in the 
carrying trade, it is always from choice and 
never from necessity: it is because in that trade 
their profits will be somewhat greater than in 
the home trade' (1984, p. 195).

In his book on imperialism J A Hobson maintains 
that foreign investments form 'the most important 
factor in the economics of imperialism' (1905, p. 
48). He goes on to state that:

Aggressive imperialism ... which is fraught with 
such grave incalculable peril to the citizen, is 
a source of great gain to the investor who cannot 
find at home the profitable use he seeks for his 
capital, and insists that his government should 
help him to profitable and secure investments 
abroad. (p. 50)

But why are profitable investments not to be 
found at home? Hobson does not refer to this 
decisive question. In general his study, which is 
a valuable descriptive work, evades all 
theoretical issues. A Sartorius von Waltershausen 
states that 'in today's world economy the 
agrarian countries are net importers of capital, 
the industrialised countries net exporters' 
(1907, p. 52). However he adds that 'even the 
highly developed countries stand in 
debtor-creditor relationships to one another' (p. 
52). Obviously the agrarian/industrialised 
distinction cannot account for export of capital. 
In that case what is the driving force behind 
this? Sometimes Sartorius refers to 'economic 
saturation', a superfluity of the available 
capital in relation to investment possibilities. 
But this is not explained. Sartorius appears to 
have a vague feeling that such a state of 
saturation is linked to a relatively advanced 
stage of capitalist development. But Sartorius 
stays at this purely empirical level.

The treatment of this problem by S Nearing and J 
Freeman is just as unsatisfying. They agree that 
the industrialised countries of Europe became 
exporters of capital only at a specific stage in 
their development. The same is true of America: 
'The United States also reached this stage at the 
start of the present century'(1927, p. 23). The 
trend was then accelerated by the war - a whole 
process of development which might otherwise have 
taken much longer was compacted into a single 
decade by the events of the war. But what were 
these events? The warenormously speeded up the 
transformation of the USA from the position of a 
debtor to one of a creditor. The USA became a 
capital exporting nation 'and was bound to remain 
so as long as there was surplus capital looking 
for investment' (p. 24). But the authors do not 
show why such a surplus emerges or why it cannot 
find investment in the domestic economy.

Even in Marxist writings we search in vain for 
any explanation of the specific function of 
capital exports in the capitalist system. 
Marxists have simply described the surface 
appearances and made no attempt to build these 
into Marx's overall system. So Varga says, 'The 
importance of capital exports to monopoly 
capitalism was analysed in detail by Lenin in 
Imperialism; hardly anything new can be added' 
(1928, p. 56). Elsewhere he simply casts aside 
any attempt to analyse the problem theoretically 
and simply produces facts about the volume and 
direction of international capital flows. 'The 
rate of profit', he says, 'regulates not only the 
influx of capital into individual branches of 
industry, but also its geographical migrations. 
Capital is invested abroad whenever there are 
prospects ofobtaining a higher rate of profit' 
(1927, p. 363). This conclusion is hardly 

Varga fails to understand the dimensions of the 
question when he goes on to say, 'Capital is 
exported not because it is absolutely impossible 
for it to accumulate domestically without 
"thrusts into non-capitalist markets", but 
because there is the prospect of higher profit 
elsewhere' (p. 363). In other words Varga starts 
from the false assumption that whatever its total 
amount, capital can always find an unlimited 
range of investment possibilities at home. He 
overlooks the simple fact that in denying the 
possibility of an overabundance of capital, he 
simultaneously denies the possibility of an 
overproduction of commodities. In addition Varga 
imagines any argument that there are definite 
limits to the accumulation of capital, and that 
capital export necessarily follows, is 
incompatible with Marx's conception and can only 
be made from Luxemburg's position.

I shall show that Varga's conception is 
untenable, that it was precisely Marx who showed 
that there are definite limits to the volume of 
capital investments in any single country; that 
it was Marx who explained the conditions under 
which there arises an absolute overaccumulation 
of capital and therefore the compulsion to export 
capital abroad. Varga does not notice that his 
conception of unlimited investment possibilities 
flatly contradicts and is incompatible with any 
labour theory of value. Investment of capital 
demands surplus value. But surplus value is 
labour and in any given country labour is of a 
given magnitude. From a given working population 
only a definite mass of surplus labour is 
extortable. To suppose that capital can expand 
without limits is to suppose that surplus value 
can likewise expand without limits, and thus 
independently of the size of the working 
population. This means that surplus value does 
not depend on labour.

Sternberg argues that the export of capital 
constitutes a powerful factor for generating a 
surplus population. By reinforcing the reserve 
army it depresses the level of wages and enables 
a surplus value to arise(!). The expansion of 
capital 'is therefore one of the strongest 
supports of the capitalist relation and its 
continuity over time' (1926, p. 36) because a 
surplus value can arise 'only if there is a 
surplus population' (p. 16).

Export of capital is supposed to be the most 
powerful factor of surplus population. Yet in 
Germany in the years 1926-7 we saw the exact 
opposite: massive inflows of foreign capital were 
crucial to the general wave of rationalisation 
and played a major role in displacing workers or 
creating a surplus population. If it were simply 
a question of reducing the amount of capital so 
as to reduce the demand for labour then a simple 
transfer of capital would be enough to solve 
this. For instance German capitalists can go to 
Canada and settle down there. But this is not an 
export of capital so much as a loss of capital. 
In fact if it were simply a question of reducing 
the amount of capital, the essential aspect of 
capital exports - the drive to improve the 
conditions for the further expansion of capital - 
would no longer hold.

Sternberg tries to explain the export of capital, 
as he does all other phenomena of capitalism, by 
reference to competition. Yet the problem is to 
explain capital exports in abstraction from 
competition and therefore from the existence of a 
surplus population. The question is, what compels 
the capitalist to export capital when there is no 
reserve army and labour power is sold at its 

Hilferding is not much better. Because he denies 
the possibility of a generalised overproduction 
of commodities, there are no limits to the 
investment of capital in a given country. So 
capital is exported only because a higher rate of 
profit can be expected: 'The precondition for the 
export of capital is the variation in rates of 
profit, and the export of capital is the means of 
equalising national rates of profit' (1981, p. 
315). The same holds for Bauer. Inequality of 
profit rates is the sole reason why capital is 
exported: 'Initially the rate of profit is higher 
in the more backward countries which are the 
targets of imperialist expansion ... capital 
always flows to where the rate of profit is 
highest' (1924, p. 470).

Capital exports are thus explained in terms of 
the tendency for the rate of profit to equalise. 
But Bauer has the feeling that this explanation 
is quite useless when it comes to understanding 
modern imperialism. There has always been a 
tendency for rates of profit to equalise, whereas 
capital exports from the advanced capitalist 
countries started with real vigour only recently. 
Bauer himself says:

The drive for new spheres of investment and new 
markets is as old as capitalism itself; it is as 
true of the capitalist republics of the Italian 
Renaissance as of Britain or Germany today. But 
the force of this tendency has increased 
enormously in the recent decades. (p. 471)

How does he explain this? Ultimately Bauer has to 
look for an explanation of rising capital exports 
in the aggressive character of modem imperialism, 
which is precisely what has to be explained. 
Apart from this, if higher rates of profit are 
what account for the flow of capital to the less 
developed continents of Asia, Africa and 
elsewhere, then it is impossible to understand 
why capital should ever be invested in the 
industries of Europe and the United States. Why 
is the whole surplus value not earmarked for 
export as capital?

In fact we have already seen that an average rate 
of profit forms on the world market. On page 247 
of his book Bauer knows this. But when he comes 
to deal with the roots of export of capital and 
imperialist expansion (p. 461) he forgets it and 
falls back onto the banal conception that the 
higher rate of profit of the backward countries 
is the cause of capital exports. We argued 
earlier that on the world market the 
technologically more advanced countries make a 
surplus profit at the cost of the technologically 
backward nations with a lower organic 
composition. This is what stimulates and 
simultaneously drives capital to keep developing 
technology, to force through continuous increases 
in the organic composition in the advanced 
countries. Yet this only means that as 
progressively higher levels of organic 
composition are introduced, a field is 
simultaneously created for more profitable 
investments. However high profits may be in the 
colonial countries, they would appear to be 
higher still in the chemical and heavy industries 
at home which, given their organic composition, 
are making surplus profits. So the question 
remains - why is capital exported at all? Bauer 
can't explain this.

It is not necessarily true that in countries 
recently opened up to capitalist production the 
organic composition is always lower. While West 
European capitalism may have needed 150 years to 
evolve from the organisational form of the 
manufacturing period into the sophisticated world 
trust, the colonial nations do not need to repeat 
this entire process. They take over European 
capital in the most mature forms it has already 
assumed in the advanced capitalist countries. In 
this way they skip over a whole series of 
historical stages, with their peoples dragged 
straight into gold and diamond mines dominated by 
trustified capital with its extremely 
sophisticated technological and financial 
organisation. Does Bauer mean to suggest that 
British capitalists invest in railway 
construction in Africa or South America because 
the organic composition of the railways there is 
lower than in England? Argentina's beef industry 
works on huge refrigerated plants equipped with 
the most modern technology with large sums of 
capital invested by the meat-processing firms of 
Chicago. An industry of this type could only have 
developed after a revolutionary change in 
transport and refrigeration techniques, and this 
again presupposes a high organic composition of 

Bauer senses that there is no factual basis in 
the argument about higher rates of profit in less 
developed countries, so he drags in various other 
factors in the conviction that piling up doubtful 
arguments is a good enough substitute for one 
correct one. 'At any given time', he says, 'a 
part of the social money capital always lies 
fallow' (1924, p. 462). 'If too much money 
capital lies fallow the consequences can be 
disastrous for capitalism' (p. 462). Therefore 
there is a drive for spheres of investment that 
will absorb the superfluous capital. One form of 
this drive is the export of capital which, 
according to Bauer, 'reduces the volume of 
capital that lies fallow in a given country at a 
given time' (p. 470).

Here two completely different explanations tend 
to coalesce. One deals with productive capital, 
the other with money capital that is not active 
in production. In his second theory Bauer has 
merely confused money capital which is deposited 
in banks with capital that lies fallow and 
searches for investment opportunities. A portion 
of the total social capital must always exist in 
the form of money, in the shape of money capital. 
If reproduction is to be continuous the size of 
this portion cannot be reduced at will. The 
period of time which capital, individual or 
total, spends in any of its three forms is not 
determined arbitrarily by bankers or 
industrialists. It is objectively given. And 
because the size of money capital is not 
arbitrarily determined, any more than is the size 
of commodity capital or productive capital, 
definite numerical ratios must obtain in the 
division of capital into three portions. Marx 

The magnitude of the available capital determines 
the dimensions of the process of production, and 
this again determines the dimensions of the 
commodity capital and money capital in so far as 
they perform their functions parallel with the 
process of production. (1956,p. 106)

Summarising the results of his analysis Marx writes:

Certain laws were found according to which 
diverse large components of a given capital must 
continually be advanced and renewed - depending 
on the conditions of the turnover - in the form 
of money capital in order to keep a productive 
capital of a given size constantly functioning. 
(p. 357)

He goes on to add that to 'set the productive 
capital in motion requires more or less money 
capital, depending on the period of turnover' (p. 
361). So although money capital is itself 
unproductive - it creates no value or surplus 
value and limits the scale of the productive 
component of capital - it cannot be arbitrarily 
diminished or cast aside because it fulfils 
necessary functions.

Bauer turns all this upside down. In Marx the 
money capital that lies fallow is only a portion 
of industrial capital in its real circuit, 
constituting a unity of its three circuits. In 
Bauer money capital that lies fallow is a part of 
money capital 'which has been pushed out of the 
circuit of capital' (1924, p. 476).

In Marx the size of the money capital depends on 
the length of the turnover period. In Bauer the 
length of the turnover period depends on the size 
of the money capital. So instead of a slower 
turnover tying up too much money capital, an 
accumulation of too much money capital slows down 
the turnover according to Bauer.

The upshot is that production does not determine 
circulation, circulation determines production. 
Bauer says: 'Any change in the ratio of fallow to 
invested capital, of productive capital to 
capital in circulation ... completely transforms 
the picture of bourgeois society' (p. 463). The 
mystical power of money capital to do this lies 
with the banks. In fact expansion is only 
possible due to the banks: 'Thanks to the scale 
of resources at their disposal at any given time, 
they [the banks] can consciously direct the flow 
of capital to the dominated areas' (p. 472). 
Capital is exported because the banks decide it. 
The banks seemingly can do what they like.

So what of the objective laws of capitalist 
circulation? Obviously for Bauer these must 
belong to the realm of fantasy.

Bauer refers to fallow money capital which is 
expelled from the circulation of industrial 
capital and returns to production through the 
export of capital. But from statistics on 
international trade, Bauer knows that 
international capital movements take place mainly 
in the form of commodities and hardly at all in 
the form of money or as money capital. It is not 
money capital but commodity capital which is 
expelled from the circulation of industrial 
capital. This merely shows that there is an 
overproduction of commodity capital which is 
unsaleable and which cannot therefore find its 
way back into production. In fact Baser himself 
accepts that export of capital creates an outlet 
for commodities.

Overaccumulation and export of capital in Marx's conception

Marx points to the consistency of Ricardo's 
argument that if overproduction of commodities is 
impossible then there 'cannot ... be accumulated 
in a country any amount of capital which cannot 
be employed productively' (Ricardo, 1984, p. 193).

This proposition is founded on J B Say's thesis 
that demand and supply are identical. It shows 
that 'Ricardo is always consistent. For him, 
therefore, the statement that no overproduction 
(of commodities) is possible, is synonymous with 
the statement that no plethora or overabundance 
of capital is possible' (pp. 496-7). Marx then 
refers to the 'stupidity of his [Ricardo's] 

who deny overproduction in one form (as a general 
glut of commodities on the market) and who not 
only admit its existence in another form, as 
overproduction of capital, plethora of capital, 
overabundance of capital, but actually turn it 
into an essential point of their doctrine. (p. 

The epigones of Marx, for instance Varga, merely 
reverse this stupidity. They accept the 
overproduction of commodities and even 'make this 
a fundamental part of their doctrine', but deny 
the overproduction of capital.

For Marx there could be no fundamental 
distinction between the two phenomena. The 
question is: what is the relation between these 
two forms of overproduction, the form in which it 
is denied and the form in which it is asserted or 
accepted? 'The question is, therefore, what is 
the overabundance of capital and how does it 
differ from overproduction?' (p. 498).

Those economists who admit to the possibility of 
an overabundance of capital maintain that 
'capital is equivalent to money or commodities. 
So overproduction of capital is overproduction of 
money or of commodities. And yet the two 
phenomena are supposed to have nothing in common 
with each other' (p. 498). Against this 
'thoughtlessness, which admits the existence and 
necessity of a particular phenomenon when it is 
called A and denies it when it is called B' (p. 
499) Marx emphasises that when we are dealing 
with overproduction we are not dealing merely 
with an overproduction of commodities as 
commodities. We are dealing with 'the fact that 
commodities are here no longer considered in 
their simple form, but in their designation as 
capital' (p. 498). The commodity 'becomes 
something more than, and also different from, a 
commodity' (p. 499).

In a situation of overproduction the producers 
confront one another not as pure commodity owners 
but as capitalists. This means that in every 
crisis the valorisation function of capital is 
disrupted. A capital that fails to valorise 
itself is superfluous, overproduced capital. In 
this sense overproduction of commodities and 
overproduction of capital are the same thing. 
'Overproduction of capital, not of the individual 
commodities - although overproduction of capital 
always includes overproduction of commodities - 
is thus simply overaccumulation of capital' 
(Marx, 1959, p. 251).

The heart of the problem of capital exports lies 
in showing why it is necessary and under what 
conditions it comes about. Marx's achievement was 
that he did precisely this.

Marx showed the circumstances which determine a 
tendential fall in the rate of profit in the 
course of accumulation. The question arises - how 
far can this fall go? Can the rate of profit fall 
to zero? Many writers believe that only in such a 
case can we speak of an absolute overaccumulation 
of capital. As long as capital yields a profit, 
however small, we cannot speak of 
overaccumulation in an absolute sense because the 
capitalist would rather be content with a small 
profit than have no profit at all.

I shall show that this idea is completely false, 
that there is a limit to the accumulation of 
capital and this limit comes into force much 
earlier than a zero rate of profit. There can be 
absolute overaccumulation even when capital 
yields a high interest. The crux of the matter is 
not the absolute level of this interest, but the 
ratio of the mass of surplus value to the mass of 
accumulated capital.

In identifying the conditions on which this limit 
depends mere empiricism is quite useless. For 
instance in the utilisation of fuel the 
experience of almost 100 years has shown that it 
was always possible to obtain a greater quantity 
of heat from a given quantity of coal. Thus 
experience, based on several decades' practice, 
might easily suggest that there is no limit to 
the quantity of heat obtainable through such 
increases. Only theory can answer the question 
whether this is really true, or whether there is 
not a maximum limit here beyond which any further 
increases are precluded. This answer is possible 
because theory can calculate the absolute 
quantity of energy in a unit of coal. Increases 
in the rate of utilisation cannot exceed 100 per 
cent of the available quantity of energy. Whether 
this maximum point is reached in practice is of 
no concern to theory.

Starting from considerations of this sort Marx 
asks, what is overaccumulation of capital? He 
answers the question thus: 'To appreciate what 
this overaccumulation is ... one need only assume 
it to be absolute. When would overproduction of 
capital be absolute?' (1959, p. 251) According to 
Marx absolute overproduction would start when an 
expanded capital could yield no more surplus 
value than it did as a smaller capital:

As soon as capital would, therefore, have grown 
in such a ratio to the labouring population that 
neither the absolute working time supplied by 
this population, nor the relative surplus working 
time, could be expanded any further (this last 
would not be feasible at any rate in the case 
where the demand for labour were so strong that 
there were a tendency for wages to rise); at a 
point, therefore when the increased capital 
produced just as much, or even less, surplus 
value than it did before its increase, there 
would be absolute overproduction of capital. (p. 

According to Marx's definition of absolute 
overaccumulation it is not necessary for profit 
on the total capital to disappear completely. It 
disappears only for the additional capital which 
is accumulated. In practice the additional 
capital will displace a portion of the existing 
capital so that for the total capital a lower 
rate of profit results. However whereas a falling 
rate of profit is generally bound up with a 
growing mass of profit, absolute overaccumulation 
is characterised by the fact that here the mass 
of profit of the expanded total capital remains 
the same.

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