Re: [OPE-L] Grossmann and world trade

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Thu Aug 10 2006 - 01:00:43 EDT

>Though sometimes insightful, H. Grossman's theorems are very abstract and
>general-theoretical, and could be read in different ways. See
>He seems to argue that capital exports must occur because of a falling
>profit rate and overaccumulation of production capital domestically. But
>there is no good evidence for this, other than in the sense that bad
>economic conditions generally (due to any number of causes) can obviously
>cause capital flight or capital exit. He has very little to say specifically
>about the world market, except in relation to profitability. Presumably that
>is, because in his view the general laws of motion of production capital
>regulate the world market, and that accumulation is purely a function of
>As Ernest Mandel noted, H. Grossmann in his critique of O. Bauer
>did not question O. Bauer's untenable assumption of identical S/V
>and C/V proportions in the growth of both department I and Department II

why important to relax those assumptions in addition to the many
assumptions that he did relax in the course of study of counter-tendencies?
Not explained here.
Do remember that Grossman did relax assumption of sale at value
for each department in order to counter Luxemburg's critique of schema.
And since Grossman's crisis theory in this book is not based on
between departments, this criticism simply misses the point.

>sometimes H. Grossman suggests (i) that valorisation difficulties form an
>absolute limit, if they lead to a decline of the surplus value consumed
>unproductively by capitalists, yet at another point his argument is that
>(ii) the impossibility of valorising all of the accumulated capital
>'profitably' brings the whole of the valorisation process to a halt. As
>regards (i), the consumed portion of surplus value could be shared out among
>a relatively smaller and smaller number of capitalists, so that a declining
>total share in total surplus value by capitalists as disposable personal
>income could go together with increasing consumption expenditure by each

yes good point.

>As regards (ii) if the total mass of surplus value produced is
>insufficient to valorise the total accumulated production capital, the
>result is not necessarily the collapse of the whole economy, but only the
>destruction of the excess capital, through competition and crisis.

actually he argues that militarism and destructive war become
an excellent means towards such destruction.

>  All that
>Grossman proves, is an endogenous tendency towards overaccumulation, leading
>to devalorisation in overproduction crises. He does not really discuss
>credit economy in any depth at all.

he does in fact do this, saying that Marx's own treatment was quite

>  He also does not allow for the
>possibility that if a capitalist cannot achieve a profit of (say) 10% on his
>capital through productive investment, he would be quite happy with a 5%
>profit from paper securities or real estate, if the alternative is no
>return, or a negative return.

actually he deals with this problem at length. Please reconsult.

>In H. Grossman's theory, "A capital that fails to valorise itself is
>superfluous, overproduced capital." But at least in Marx's own theory, that
>is not the case at all. Valorisation in Marx's theory applies specifically
>to production capital, not to ALL capital. Profits can be made, and
>surplus-value realised, also in the circulation of money capital and
>commodity capital, and the more products and assets are physically produced
>and owned, globally, the more money can be made out of their exchange.

do you think Grossman denies the importance of profiteering through
stock market speculation, real estate speculation, betting on the futures
market, etc? Again please reconsult the text.

>"excess capital" in Marx's theory, in other words, refers specifically to
>excess production capital, and not to every kind of capital. When reference
>is made to "three Departments" of capitalist investment, what is meant is
>production capital only, not the total social capital divided among these
>three sectors. Therefore the three sectors of production should I think also
>not be confused with the three forms of capital (money capital, commodity
>capital and production capital) as not infrequently happens in the
>transformation problem literature. For example, Duncan Foley (Understanding
>Capital, p. 66) writes: "We can think of the circuit of social capital as
>the combined circuits of all the individual capitals that make up the whole.
>Then it is natural to think of the capitalist production process as a closed
>circuit, with the different forms of capital - financial capital, production
>capital, and commercial capital - at the three main nodes." The circulation
>of capital need not be mediated by production at all.

Grossman deals at length with the implications of his theory for the dynamics
of commercial and financial capital.

Have you read the book?


>Even if you accept H. Grossman's idea that capitalism must ultimately
>collapse due to purely economic causes, obviously capitalism can
>also revive again as well (cf. Argentina in recent years).

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