Here Luxemburg unpicks in detail the reproduction schemas described by Marx in Volume 2 of Capital. Marx defines two different basic formulae. Under simple reproduction, the economy remains the same size from year to year, with just sufficient productive activity taking place to replace what is consumed. Of course this exists only in theory. Capitalism is driven by the need to continuously expand, so simple reproduction serves only to demonstrate the basic approach to the problem.
This method abstracts the economy into two basic sections. One part which produces just means of production, commodities supporting the production process. A second part which produces means of consumption, commodities which will be consumed by society. The two sections clearly need to work in close lock step. Sufficient means of production must be created to support continuing production. Sufficient means of consumption must be produced to support the population. Marx goes into mathematical detail (which I won’t duplicate here) to demonstrate how this interaction must work for the economy to function.
In reality though, capitalism is driven by expanded reproduction, or ‘accumulation’. Here a portion of surplus value is used to increase the output of the economy year on year. Marx again shows how this might work mathematically, but somehow it is never quite convincing.
This brings us to the key criticism made by Luxemburg. For the economy to expand in this way then there must be demand for the increased output of both means of production and consumption goods. Marx’s expanded reproduction schema shows production increasing. But where does the increased demand come from? An economy operating at a particular capacity simply ought not to generate the demand (backed by the ability to pay) over and above that needed for simple reproduction. Marx demonstrates mathematically how the growth of an economy should progress, but not the process by which this expansion can actually happen.
What is more the expanded reproduction schema ignores the tension between the drive to produce more and more surplus value (and therefore commodities to be consumed for their value to be realised by the individual capitalist) and capitalism’s need to curtail the capacity for consumption of the majority of the population. The schema as described by Marx implies that accumulation can continue smoothly and indefinitely in mathematical progression. This does not match the lived experience of capitalism with it’s booms and busts. The absence of a smooth growth trajectory is a fundamental part of the system. In other words there must be a flaw in Marx’s analysis.
Marx assumes throughout that the economy in question is a fully self contained capitalist one with only two classes – capitalists and workers – and this is where Luxemburg identifies the critical point. Capital has since the beginning existed in a world which includes significant elements operating in non-capitalist ways, whether it is left over peasants and handicraft workers in the same country or colonies and developing countries overseas. Throughout it’s history capitalism has not been the closed system that Marx assumes in the reproduction schema.
Luxemburg gives two reasons why this is important. First the existence of a market outside capitalism itself creates the safety valve that is missing in the schema. This is where the demand comes from that allows the system to move beyond simple reproduction, allowing surplus value to be turned into capital and reinvested in expanding production.
“the surplus value that is to be capitalized and the corresponding part of the capitalist mass of products cannot possibly be realized within the capitalist sphere, and must therefore at all costs find purchasers outside this sphere, in social strata and formations not engaged in capitalist production.”
(Luxemburg 2016 p. 259)
The progressive growth in production also implies a growth in the workforce and allowing the world outside capitalism to be included in the theory makes clear where these additional workers come from – that is the ranks of peasants and others who are progressively brought into the world of waged work.
“It must be able to draw on other social reservoirs of labor-power not previously under the command of capital, which are added to the wage proletariat as required.”
(Luxemburg 2016 p. 260)
This is an aggressive and destructive process. Marx discusses “primitive accumulation” as something that kick starts the beginning of capitalism. Luxemburg asserts that in fact this continues all around us. In her time it was the growth of colonies and imperialism. In ours we might see it in the extension of commodity exchange to areas of life not previously touched by capitalism such as childcare.
“the accumulation of capital as a historical process, in all its relations, is contingent upon noncapitalist social strata and forms.”
(Luxemburg 2016 p. 263)
Luxemburg explicitly states then that when capital is no longer able to expand outwards into the non-capitalist world, when the whole globe is fully incorporated into capitalism, that the system will no longer be tenable and must collapse.
“Yet the more violently, forcefully, and thoroughly imperialism brings about the decline of noncapitalist civilisations, the more rapidly in removes the very basis for hte accumulation of capital. As much as imperialism is a historical method to prolong the existence of capital, objectively it is at the same time the surest way to bring this existence to the swiftest conclusion.”
(Luxemburg 2016, p.325)
Although there is much that is valuable in Luxemburg’s thinking, I think there are two basic problems.
First that the century of capitalism since Luxemburg wrote this has shown it’s ability to find new spaces for exploitation. To the extent that her analysis is correct, it does not imply the approach of the ultimate crisis of capitalism that she is seeking to demonstrate. It simply confirms the system’s dynamic nature, its ability to find new outlets and opportunities for primitive accumulation. Nothing from the last hundred years suggests there is any inherent limit to this.
Second and more significantly I think that Luxemburg misses Marx’s point. David Harvey points out that the expanded reproduction schema is constructed in such precise terms that it is hard to believe that Marx is not trying to point out that securing such a smooth path to accumulation is highly unlikely. Marx’s schema demonstrates the expanded reproduction is mathematically possible. But think about all the different processes that have to align in order for this to work: wages we must be suppressed to maintain profits, but sufficient to support realisation; the relation between producing means of production and means of consumption which must be just right to avoid overproduction as a result of disproportionality.
Obviously the schemas are totally unrealistic, and Marx has cooked the figures to fit his case. But are the schemas so unrealistic as to reveal nothing about the nature of the stresses, strains and contradictions, as well as the dynamic capacities, of a capitalist mode of production? If not, what are the schemas intended for?
(Harvey 2013, p. 368)
In other words the schema is an analytical tool rather than a statement of categorical truth. Something which allows us to examine what mechanisms the system must possess for it to function, how they must mesh together, and more importantly where they might jar and clash. Luxemburg is therefore undoubtedly right to point out how difficult it is for expanding capital to realise itself in the market, and no doubt aggressively exploiting the remaining non-capitalist segments is part of how capitalism solves this. But so is debt, speculation, and the loss of value or destruction of individual capitals which guessed the market wrong. The system is fundamentally not stable. Marx’s toolbox can help us to understand where and how that instability appears and its impact.
Luxemburg, Rosa The Complete Works of Rosa Luxemburg Volume II: Economic Writings 2 (Verso, London, 2016)
Marx, Karl Capital A Critique of Political Economy Volume 2 (Penguin, London, 1992)
Harvey, David A Companion to Marx’s Capital Volume 2 (Verso, London, 2013)