‘Capitalism’s Contradictions: Studies in economic theory before and after Marx’ reviewed by Pete Green

Reviewed by Pete Green

About the reviewer

Pete Green is an Independent Researcher and UCU Retired Member. …


Henryk Grossman (1881-1950) was one of the most significant Marxist theoreticians in the fields of political economy and the history of scientific thought in the first half of the twentieth century. Yet his major work the much-maligned The Law of Capitalist Accumulation and Breakdown of the Capitalist System: Being Also a Theory of Crises, from 1928, is still only available in English in a severely abridged version – although the complete Banaji translation is now scheduled to appear in the HM book series.

In the meantime the publication of this collection of five  long essays or ‘monographs’, mostly devoted to the history and  development of economic theory, is very welcome. Rick Kuhn, author of an invaluable intellectual biography of Grossman, which I reviewed at length elsewhere (Kuhn 2007, Green 2008) provides a clear and scholarly 30 page introduction.

Three of the essays focus on some neglected predecessors of Marx rather than the much debated developers of a labour theory of value, Smith and Ricardo. The earliest from 1924, on the early 19th century economic historian Simonde de Sismondi,  newly translated from the French version by Ian Birchall, was for this reviewer at least a  revelation.

Sismondi is best known today as the proponent of an underconsumptionist theory later taken up by the Narodniks as proof of the impossibility of capitalist development in late 19th century Russia and as such demolished very effectively by Lenin. Grossman completely ignores that debate – although according to Kuhn (6) he echoes Lenin’s critique  in some shorter pieces from the 1930s. Instead he sets out to defend Sismondi against criticisms that he was primarily a social reformer with a poor grasp of economic theory.  Sismondi’s critique, in his New Principles of Political Economy of 1821, ‘of the English school that it “loses itself in abstractions” ‘(40) and his insistence on the empirical realities of glut and unemployment were regarded by his opponents as evidence of opposition to ‘the abstract method’ of Ricardo in particular (34). For Grossman: ‘…Sismondi is not opposed to abstraction in general but only to abstraction that sets aside essential elements of reality.’(40)

Grossman highlights a Sismondi who, drawing on Quesnay’s famous Table which Marx also valued highly, constructs a model of a pure capitalism with only capitalists and wage-workers. This in turn is deployed to critique the ‘harmonicist’ conceptions of the classical school, which is incapable of explaining recurrent crises of overproduction – and can only acknowledge ‘passing disruptions’ as a result of war, commercial restrictions, fiscal policy and so on. (49) For Sismondi by contrast in an economic system based on production for exchange value it ‘is impossible to make a proportional fit between the amount of production and the extent of needs. Disproportion becomes then and as a rule a normal phenomena.’ (58 Italics in Grossman’s original text).

Grossman also emphasizes, referencing Marx himself, that Sismondi regards ‘the opposition between use-value and exchange-value’ as ‘the original source of the disruptions that appear in our economic mechanism’ (61). In particular whilst competition may result in increased productivity and output of use-values the consequence will be a fall in prices for the individual commodity. A further consequence is that some smaller producers will go bankrupt and there is a ‘natural tendency to concentration’ (65).  Grossman notes that whereas the classical economists identified capital ‘with the material elements of production’ (68) Sismondi sees capital as a social relation resting on the exploitation of wage labour, anticipating the theory of “surplus-value”, ‘with a precision that nobody before Marx had achieved’ (69).

Grossman concludes this remarkable exercise in rehabilitation with a brief discussion of Sismondi as a social reformer, who advocated a system of compulsory insurance financed by employers and landlords(76). He acknowledges that Sismondi was not a socialist in the sense of contemporaries  such as Fourier who sketched out utopian alternatives. But he considers Sismondi a more far-reaching critic of the system than those such as Owen and Proudhon who ‘attack only money and aim to abolish only the “privileges” of precious metals, while preserving trade based on exchange and the exchange of commodities’ (84).

Sismondi also features in the later essay, titled ‘The Evolutionist Revolt against Classical Economics’ originally published in English in 1943 when Grossman was in exile in the USA. The central theme is the emergence of an evolutionary approach to history, the origins of which Marx locates not in Hegel but in the French tradition starting with the Enlightenment thinker Condorcet and proceeding via Saint-Simon and Sismondi. Unlike Hegel for whom history had come to an end with the Prussian state, these thinkers were pioneers of the history of successive economic systems, and unlike Smith and Ricardo they did not think that capital and exchange  were universal features of social interaction. In the later part of the essay the Reverend Richard Jones is singled out for his criticism of the supposed universality of Ricardo’s laws (213) and for his recognition of capitalism as ‘a historical and transitory, though necessary, stage on the road to a more advanced economy’(217). Another neglected thinker from early 19th century Britain, William Playfair,  receives comparable appreciation in the  concluding essay in this volume, one of Grossman’s last published works.

The longest essay in the collection, ‘Marx, Classical Political Economy and the Problem of Dynamics’ is primarily concerned with the degeneration of orthodox political economy after the demise of the last great thinker of the classical school, Ricardo. This first appeared in English in two parts in the journal Capital and Class in 1977 but is published here in a new translation by the editor. A short opening section echoes Marx’s comments on the emergence of vulgar economics in response to the growing strength of the working-class movement and the appearance of Ricardian socialists such as Thompson and Hodgskin. There follows an impressive demolition job on the neo-classical economics which emerged in the late 19th century and remains textbook orthodoxy today.

This critique is organized around two themes in particular. The first proceeds from analysis of the commodity as a unity of exchange-value and use-value. As is generally recognised this duality is applied by Marx to the production process as a unity of a technical labour process and a valorization process.  Grossman insists that this duality runs through the whole of Marx’s analysis in Capital. One example is the tendency of the average rate of profit to fall, which can only be understood as a function of a rise in labour productivity generating both a greater mass of use-values and inversely a fall in their individual exchange-value. Neoclassical economics in contrast focuses only on exchange, has a subjectivist theory of value, which runs into insoluble difficulties, and completely ignores the duality of the production process.

The second theme is the reliance of neoclassical economics on a construct of equilibrium. Dynamics within this framework can only be a succession of static equilibria excluding any  analysis of the real movement from one state to another. Of particular interest here methodologically is Grossman’s sharp dissection of how insistence on the mathematical method, especially the reliance on simultaneous equations by Walras and his successors,  excluded any possibility of even recognizing the real disproportions of a capitalist economy. Grossman explains brilliantly how, given the existence of fixed capital of varying lifespans and differential turnover times for individual capitals, such disproportions are inevitable and disequibria are not automatically resolved by the movement of prices or market forces (178-181). Marx’s own schemas of reproduction should be interpreted as a means to explore how general equilibrium requires that both value and use-value (or material) conditions of proportionality are met (182) and in reality this can only  occur ‘exceptionally and by chance’ (185). This is an essay which has lost none of its relevance for current debates.

That cannot be said of the essay ‘Fifty Years of Struggle over Marxism’, from 1932.  An extensive survey of the diverse currents in German and Austrian social democracy that  draws on both Rosa Luxemburg and Lenin, whose critiques are confirmed by the reformist trajectory of both Hilferding and Kautsky in the 1920s . On the themes of war and imperialism it conforms to the Communist party orthodoxy at a time when Grossman was a fellow-traveller.  Kuhn highlights the favorable mentions of Lukacs on History and Class Consciousness and the appearance of Trotsky’s War and the International of 1916 in the bibliography, which was certainly not the party line, but there is little of substance here on philosophical questions.

Of more interest is a final section on ‘The End of Capitalism’ which counterposes Grossman’s own work to ‘all previous breakdown theorists’ (128). There follows a five page summary of his 1928 magnum opus which I will not attempt to summarise further. But one issue demands a comment.  Kuhn (2007) and others have claimed that Grossman’s theory derives from Marx’s explanation of the tendency of the rate of profit to fall. Yet whilst Grossman has much of interest to say on both  tendency and counter-tendencies he is adamant in this essay that his own breakdown theory is different. To quote just one sentence: ‘Why can’t capitalism survive with a rate of profit of 4% just as well as with one of 13-15%, as the declining rate is offset by a rising mass of profit?’ (130)

It’s a very good question.

12 March 2018


  • Green, Peter 2008 Review of Rick Kuhn’s Henryk Grossman and the Recovery of Marxism’ Historical Materialism vol 16, no 2, pp 207-216
  • Kuhn, Rick 2007 Henryk Grossman and the Recovery of Marxism Chicago, University of Illinois Press

One comment

  1. I start by thanking the reviewer profusely for a very fine review. For me this is a brilliant review, because I learned many invaluable new things. I shall certainly endeavour to get hold of this book.
    I have two substantive comments that may be of interest. The first is also of relevance to the debate about modelling.
    The reviewer writes:
    ” … general equilibrium requires that both value and use-value (or material) conditions of proportionality are met (182) and in reality this can only occur ‘exceptionally and by chance’ (185). ”
    This is of course, manifestly true in reality. However, it is possible to show by numerical examples, as many writers have used, that it is possible to find conditions in which all the inputs and outputs are in balance. This is achieved by deliberately choosing values, including capital transfers which give a balance. This of course, cannot be achieved in reality, because capitalists do not communicate the relevant data to one another, because of competition. But the more important result of such numerical calculations, is that while this theoretical ‘capitalist’ system is balanced, it is not in equilibrium. Such an artificial system is, as everyone would expect, is still an expanding system with accelerating rate of capital accumulation. So, capitalism, even if balanced, would still be unstable.
    My second comment refers to the quote at the end of the review.
    ” ‘Why can’t capitalism survive with a rate of profit of 4% just as well as with one of 13-15%, as the declining rate is offset by a rising mass of profit?’ (130)

    It’s a very good question.”
    I would suggest that one reasonable explanation is that in practice capitalists do not merely search for wealth, but they search preferentially for a return on capital. And hence, in a sense there is always someone richer than ant rich capitalist, and the richest capitalist is always scared that another capitalist might overtake them. Mr. Branson has said that he can only eat 3 meals a day and that he wears only one set of clothes at a time. Yet, although he is a billionaire and has no need of more money, like all of capitalism he does not know what he needs but he wants what he does not need,
    I would suggest that another reasonable answer is to look at the behaviour of the richest capitalists in the world. Take North America, for example, where it is clear the the very richest capitalists continue to look for adequate investment for their capital. I suggest that it is inherent capitalist behaviour to look for the highest possible return on capital, no matter how rich the capitalist is. And for these very rich people risk is less important. Consequently, since the profit rate can be raised by lowering first the price of labour power and then the value of labour power. To drop below the subsistence level, as is currently the case in many parts of the world, is no problem, because late capitalism is highly mechanised and there is vast surplus of labour-power in the poor colonies. In conclusion, like my earlier comment above where it is clear a theoretical capitalist system may be balanced, it will still be self-expanding. So here, a theoretical stabilization of capitalism is possible, but not in reality.

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