Determinants of the Rate of Accumulation

D. Determinants of the Rate of Accumulation

Marx’s provisional assumption in analyzing Extended Reproduction that the entire surplus value is devoted to accumulation (above, p. 59) is modified when approach- ing the determinants of savings, since in actuality “[o]ne portion is consumed by the capitalist . . . the other is employed as capital . . . ” (MECW 35: 587). In this context we find the dramatic exposition of the “fanatical” drive on the part of “personified capital” to augment exchangeable value, a course of action reinforced by “competition”:

. . . so far as he is personified capital, it is not values in use and the enjoyment of them, but exchange value and its augmentation, that spur him into action. Fanatically bent on making value expand itself, he ruthlessly forces the human race to produce for production’s sake; he thus forces the development of the productive powers of society, and creates those material conditions, which alone can form the real basis of a higher form of society, a society in which the full and free development of every individual forms the ruling principle. Only as personified capital is the capitalist respectable. As such, he shares with the miser the passion of wealth as wealth. But that which in the miser is a mere idiosyncrasy, is, in the capitalist, the effect of the social mechanism, of which he is but one of the wheels. Moreover, the development of capitalist production makes it constantly necessary to keep increasing the amount of the capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by each individual capitalist, as external coercive laws. It compels him to keep constantly extending his capital, in order to preserve it, but extend it he cannot, except by means of progressive accumulation (588).

As “personified” capital there is no genuine choice to be made between accumula- tion and consumption for – subject presumably to some necessary consumption minimum – private consumption becomes an aberration: “To accumulate, is to conquer the world of social wealth, to increase the mass of human beings exploited by him, and thus to extend both the direct and the indirect sway of the capitalist.” Here too we encounter perhaps the best known of Marx’s declarations: “Accu- mulate, accumulate! That is Moses and the prophets. . . . Therefore, save, save, i.e., reconvert the greatest possible portion of surplus value or surplus product into capital!” (591).

But we must pause. The foregoing is actually a position attributed to “classical economy,” Marx citing Adam Smith’s “[i]ndustry furnishes the material which saving accumulates” (see Smith 1937 (1776): 321), and proceeding to interpret the “classical” position in this manner: “Accumulation for accumulation’s sake, production for production’s sake: by this formula classical economy expressed

62 Elements of Growth Theory

the historical mission of the bourgeoisie, and did not for a single instant deceive itself over the birth-throes of wealth. But what avails lamentation in the face of historical necessity? If to classical economy, the proletarian is but a machine for the production of surplus value; on the other hand, the capitalist is in its eyes only

a machine for the conversion of this surplus value into additional capital. Political economy takes the historical function of the capitalist in bitter earnest” (591). 10 And Malthus is cited as confirming this view of the capitalist’s role in accumulation in the sharp contrast made between this behavior and that of landlords: “It is of the highest importance, he says ‘to keep separate the passion for expenditure and the passion for accumulation’ [Malthus 1820: 365–6; 1836: 325–6].” 11

But is this Marx’s own position? Apparently not. For he points out that with the development of capitalist production “the capitalist ceases to be the mere incarnation of capital. He has a fellow-feeling for his own Adam, and his education gradually enables him to smile at the rage for asceticism, as a mere prejudice of the old-fashioned miser. While the capitalist of the classical type brands individual consumption as a sin against his function, and as “abstinence” from accumulation, the modernised capitalist is capable of looking upon accumulation as ‘abstinence’ from pleasure” (589). He goes yet further. A “conventional degree of prodigality” – of conspicuous consumption in effect – must be undertaken as a guarantee of the capitalist’s credit worthiness. Thus in contrast with early capitalism, where “avarice, and desire to get rich, are the ruling passions . . . the progress of capitalist production not only creates a world of delights; it lays open, in speculation and the credit system,

a thousand sources of sudden enrichment. When a certain stage of development has been reached, a conventional degree of prodigality, which is also an exhibition of wealth, and consequently a source of credit, becomes a business necessity to the ‘unfortunate’ capitalist. Luxury enters into capital’s expenses of representation.” (See also MECW 37: 437.) The transition from an earlier stage of capitalism when, because “average profits were low,” accumulation required “extreme parsimony,” could be dated according to Aikin from the late 1750s (Aikin 1795: 181f).

Now from this new historical perspective it might seem that there is no conflict since the capitalist’s “expenditure grows with his accumulation, without the one necessarily restricting the other” (MECW 35: 590). Yet Marx does not take this easy way out: “But along with this growth, there is at the same time developed in

10 On the orthodox recognition of “the birth-throes of wealth,” Marx asserts that “[e]ven Say says: ‘The savings of the rich are made at the expense of the poor’,” summarizing a second-

hand account of the Cours complet (see editorial note 499, MECW 35: 797). This is not the impression conveyed by Say’s chapter “De la formation des capitaux” (Say 1843 [1828–9]: 70– 4). Sismondi is cited to the effect that “modern society lives at the expense of the proletarians, on what it keeps out of the remuneration of labour” (Sismondi 1837–38:24). 11 This is not an exact quote, Malthus referring merely to “the error to couple the passion for expenditure and the passion for accumulation together, as if they were of the same nature . . . ”; nor does the context relate specifically to landlords vs. capitalists. Nonetheless, Marx’s reading of Malthus’s general position is probably correct (see e.g., Malthus 1820: 465–6; 1836: 399–400; also 1836: 374–5, 396, 403).

63 his breast, a Faustian conflict between the passion for accumulation, and the desire

D. Determinants of the Rate of Accumulation

for enjoyment.” Here Senior’s “abstinence” is briefly mentioned (592), but only to be summarily dismissed: “‘I substitute,’ he proudly says ‘for the word capital, considered as an instrument of production, the word abstinence’ [Senior 1836: 59]. An unparalleled sample this, of the discoveries of vulgar economy! It substitutes

for an economic category [capital] a sycophantic phrase – voil`a tout.” 12 Now some of the very best of Marx’s sarcasms is reserved for Senior – and extended also to Scrope, de Molinari, and Courcelle-Seneuil – the issue reducing into a “learned disputation, how the booty pumped out of the labourer may be divided, with most advantage to accumulation, between the industrial capitalist and the rich idler . . . ”; and the capitalist, according to the apologists, “rob[bing] his own self . . . whenever by incorporating labour power with [the instruments of production], he uses them to extract surplus value out of that labour power . . . instead of dissipating ‘their value’ in luxuries and other articles of consumption” (592–3). In fact, on their view, not only accumulation but capital maintenance entails a sacrifice. Mention must also be made of the charge against J. S. Mill of “absurd contradiction” in that he “accepts on the one hand Ricardo’s theory of profit, and annexes on the other hand Senior’s ‘remuneration of abstinence.’” (592n). But the mockery of Senior in no way resolves the dilemma created by Marx’s own insistence that the monomaniacal drive to accumulate applied only to early capitalism but was replaced in the modern system by a “Faustian” conflict between two ruling passions; while the (technically untenable) objection to Mill leaves unanswered the actual determination of the savings-consumption trade off. In fact, Marx’s next section starts off weakly by taking for granted a resolution: “The proportion in which surplus value breaks up into capital and revenue being given . . . ” (595).

Capital 2 contains scattered remarks on the present issue. Thus, as an aside, in the course of discussing Simple Reproduction, the capitalist’s “compelling motive” is said to be “the utmost self-expansion of his capital” (MECW 36: 444). This proves to be mere rhetoric, since in proceeding to Extended Reproduction where the matter would be of prime importance – “[i]n accumulation it is above all the rate of accumulation that must be considered” (520) – Marx merely assumes a ratio of saving to surplus of one-half, a procedure consistent with a balance of two motive forces at play rather than a single-minded drive to accumulate. A little earlier he had pointed out that “[a]s a matter of fact . . . one portion of the surplus value is spent as revenue, and the other is converted into capital” (503), taking

12 In fact, Senior subsequently uses the term “abstinence” to designate “the conduct of which profit is the reward” not “the instrument” (Senior 1836: 89).

Marx objected more generally that “[i]t has never occurred to the vulgar economist to make the simple reflexion, that every human action may be viewed, as ‘abstinence’ from its opposite. Eating is abstinence from fasting; walking, abstinence from standing still; working, abstinence from idling; idling, abstinence from working, &c. These gentlemen would do well, to ponder, once in a way, over Spinoza’s: ‘Determinatio est Negatio’ ” (MECW 35: 592n). Senior does, in fact, address this matter (1836: 60).

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issue with the view that “the aim and compelling motive of capitalist production is consumption, and not the snatching of surplus value and its capitalization, i.e., accumulation.” This formulation, read in context, is consistent with the position that neither of the two motives should be given precedence.

Taking for granted a resolution of the division of surplus value between additions to capital and revenue – the savings-consumption ratio – Marx proceeds in Capital

1 to enumerate the considerations which affect the magnitude of surplus value itself, the source of accumulation. These include the wage rate. The usual assump- tion that “wages are at least equal to the value of labor power,” as in the chapters on the production of surplus value, is subject now to an allowance for “[f ]orcible reductions” below that value, generating increased wherewithal for saving – appar- ently temporary (MECW 35: 595). Marx, does however, elaborate “[t]he constant tendency of capital . . . to force the cost of labour towards . . . zero” – zero being a mathematical limit “always beyond reach” – and this appears to refer to the secular trend (596).

Beyond wage reductions, Marx explores various means of raising “surplus prod- uct and surplus value (i.e., the subject-matter of accumulation), without corre- sponding augmentation of the constant part of capital,” such as extensions of the work-day of factory operatives, with allowance for greater wear and tear of equip- ment (598); increased intensity of labor in mining by day and night shifts operating the same instruments, such that “the mass and value of the product will rise in direct proportion to the labour expended” (599); and similarly in agriculture where more-intensive operations based on additions to circulating capital are possible:

In agriculture the land under cultivation cannot be increased without the advance of more seed and manure. But this advance once made, the purely mechanical working of the soil itself produces a marvellous effect on the amount of the product. A greater quantity of labour, done by the same number of labourers as before, thus increases the fertility, without requiring any new advance in the instruments of labour. It is once again the direct action of man on Nature which becomes an immediate source of greater accumulation, without the intervention of any new capital (599).

“Manufacturing” benefits from the foregoing by way of its raw material require- ments. In sum: “by incorporating with itself the two primary creators of wealth, labour power and the land, capital acquires a power of expansion that permits it to augment the elements of its accumulation beyond the limits apparently fixed by its own magnitude, or by the value and the mass of the means of production, already produced, in which it has its being.”

Increased productivity is a third broad consideration – though all this proves to be academic as far as concerns the technical Reproduction Schemes, which assume unchanged technology (see below Section F). In the first place, such increase by raising the purchasing power of their incomes, enables capitalists to increase consumption and saving pari passu: “With the productive power of labour increases

65 the mass of the products, in which a certain value, and, therefore, a surplus value of

D. Determinants of the Rate of Accumulation

a given magnitude, is embodied. The rate of surplus value remaining the same or even falling, so long as it only falls more slowly, that [sic] the productive power of labour rises, the mass of the surplus product increases. The division of this product into revenue and additional capital remaining the same, the consumption of the capitalist may, therefore, increase without any decrease in the fund of accumula- tion” (599–600). In fact, “[t]he relative magnitude of the accumulation fund may even increase at the expense of the consumption fund, whilst the cheapening of commodities places at the disposal of the capitalist as many means of enjoyment as formerly, or even more than formerly (600). In all this Marx is silently touching on

a major theme of Ricardo’s that “savings may be as effectually made from expendi- ture as from production; from a reduction in the value of commodities, as from a rise in the rate of profits” (Ricardo 1951–73, 1: 166–7); similarly, “the increase of net incomes, estimated in commodities, which is always the consequence of improved machinery, will lead to new savings and accumulations” (396; also 8,133).

There are, too, positive effects of increased efficiency in the capital-goods sector in addition to those in the wage-goods sector:

But hand-in-hand with the increasing productivity of labour, goes . . . the cheapening of the labourer, therefore a higher rate of surplus value, even when the real wages are rising. The latter never rise proportionally to the productive power of labour. The same value in variable capital therefore sets in movement more labour power, and, therefore, more labour. The same value in constant capital is embodied in more means of production, i.e., in more instruments of labour, materials of labour and auxiliary materials; it therefore also supplies more elements for the production both of use value and of value, and with these more absorbers of labour. The value of the additional capital, therefore, remaining the same or even diminishing, accelerated accumulation still takes place. Not only does the scale of reproduction materially extend, but the production of surplus value increases more rapidly than the value of the additional capital (MECW 35: 600).

Here Marx seems to identify the increased potential for accumulation with actual increase in accumulation.

Marx had more to say on the consequences for accumulation flowing from the cooperation of constant capital, in an important comparison between English and Chinese productivity where labor itself is treated as identical but supported by machinery in the English case alone: “An English and a Chinese spinner, e.g., may work the same number of hours with the same intensity; then they will both in a week create equal values. But in spite of this equality, an immense difference will obtain between the value of the week’s product of the Englishman, who works with

a mighty automaton, and that of the Chinaman, who has but a spinning-wheel. In the same time as the Chinaman spins one pound of cotton, the Englishman spins several hundreds of pounds” (601). It is the higher value of the larger volume of product “swollen” by “old values,” that provides a source of accumulation: “A sum, many hundred times as great, of old values swells the value of his product,

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in which those re-appear in a new, useful form, and can thus function anew as capital.” The same point is reiterated in insistence against faulty interpretation of the phenomenon, as reflecting “an inherent property” of capital (602–3). 13

In the foregoing texts Marx is dealing largely with replacement of used-up capital values in new forms. But he also elaborates on the services provided by “unused” capital which he represents as the contribution to output of past labor, despite all

appearance, taking issue here with McCulloch. 14 Especially important for us is the observation that since employment turns in part on the stock of accumulated cap- ital, as the latter expands so the mass of surplus value increases, allowing capitalists to increase simultaneously both consumption and savings:

With a given degree of exploitation of labour power, the mass of the surplus value produced is determined by the number of workers simultaneously exploited; and this corresponds, although in varying proportions, with the magnitude of the capital. The more, therefore, capital increases by means of successive accumulations, the more does the sum of the value increase that is divided into consumption fund and accumulation fund. The capitalist can, therefore, live a more jolly life, and at the same time show more “abstinence.” And, finally, all the springs of production act with greater elasticity, the more its scale extends with the mass of the capital advanced (604).

A similarly complex pattern to that outlined above is to be found in Capital 3. On the one hand, comments relating to the downward profit-rate trend (see Chapter 4, p. 132) are suggestive of the orthodox position, particularly the proposition that “the rate of profit, being the goad of capitalist production . . . its fall checks the

13 To the proposition that with technological progress “labour keeps up and eternizes an always increasing capital value in a form ever new,” Marx attaches a lengthy note on the Ricardo-Say

debate regarding the impact of increased productivity on “riches” and “values” (MECW 36: 602–3n). He concludes that Say effectively adopted Ricardo’s position without realizing it, a position confirmed in Hollander 2005, Chapter 4. 14 The contribution of “past labour” affects output in the same manner as does that of free nature: “In the same proportion as these instruments of labour serve as product formers without adding value to the product, i.e., in the same proportion as they are wholly employed but only partly consumed, they perform . . . the same gratuitous service as the natural forces, water, steam, air, electricity, etc. This gratuitous service of past labour, when seized and filled with a soul by living labour, increases with the advancing stages of accumulation” (MECW

35: 603). Once again, Marx finds bourgeois economists blinded by appearance: “Since past labour always disguises itself as capital . . . bourgeois and political economists are full of praises of the services of dead and gone labour, which according to the Scotch genius MacCulloch, ought to receive a special remuneration in the shape of interest, profit, etc. [McCulloch 1825: 291]. The powerful and ever-increasing assistance given by past labour to the living labour process under the form of means of production is therefore, attributed to that form of past labour in which it is alienated, as unpaid labour, from the worker himself, i.e., to its capitalistic form” (MECW

35: 603–4). Marx goes on to charge that “[t]he practical agents of capitalistic production and their pettifogging ideologists are as unable to think of the means of production as separate from the antagonistic social mask they wear to-day, as a slave owner to think of the worker himself as distinct from his character as a slave.” He adds in a note that “McCulloch took out

67 formation of new independent capitals and thus appears as a threat to the develop-

D. Determinants of the Rate of Accumulation

ment of the capitalist production process” (MECW 37: 240). Ricardo’s prescience in this regard is warmly applauded:

The rate of profit, i.e, the relative increment of capital, is above all important to all new offshoots of capital seeking to find an independent place for themselves. And as soon as formation of capital were to fall into the hands of a few established big capitals, for which the mass of profit compensates for the falling rate of profit, the vital flame of production would be altogether extinguished. It would die out. The rate of profit is the motive power of capitalist production. Things are produced only so long as they can

be produced with a profit. Hence the concern of the English economists over the decline of the rate of profit [Economic Manuscripts, MECW 33: 112]. The fact that the bare possibility of this happening should worry Ricardo, shows his profound understanding of the conditions of capitalist production (258). 15

On the other hand, we find a very different perspective when Marx elaborates the doctrine of secular underconsumption along Malthus’s lines according to which capitalists are “driven” to accumulate, with the “self-expansion of capital” their only purpose, as we shall see in Chapter 4.H.

To some extent these perspectives can be reconciled by reference to displacements of the savings-profit function. Thus, as in Capital 1, we find the proposition that, given the profit rate, accumulation turns on total profit – and this “not merely” with respect to its value but also (as emphasized by Ricardo) to its real purchasing power (MECW 37: 243–4). Again: accumulation occurs “not in proportion to the rate of profit, but in proportion to the impetus it already possesses” (244; emphasis added). And Marx warmly commended Richard Jones’s contention that the rate of accumulation may rise despite a falling profit rate – a Smithian theme – for a variety of reasons in addition to increase in the purchasing power of nominal profit income:

Jones emphasizes correctly that in spite of the falling rate of profit the inducements and fac- ulties to accumulate are augmented [1833: 336], first, on account of the growing relative overpopulation; second, because the growing productivity of labour is accompanied by an increase in the mass of use values represented by the same exchange value, hence in the material elements of capital; third, because the branches of production become more varied; fourth, due to the development of the credit system, the stock companies, etc., and the resultant [e]ase of converting money into capital without becoming an industrial capitalist; fifth, because the wants and the greed for wealth increase; and sixth, because the mass of investments in fixed capital grows, etc. (265; emphasis added).

There is a second complexity to be noted. That the accumulation rate turns on both total profit (in value and/or real terms) and the profit rate and might rise despite a fall in the latter is not itself problematic. The complexity in question arises because the increase in total profit coincidentally with a fall in the profit rate applies only to large or centralized firms: “this requires a simultaneous concentration

15 Of interest is a discussion of credit that allows the validity of the abstinence perspective at some

68 Elements of Growth Theory

of capital, since the conditions of production then demand employment of capital on a larger scale. It also requires its centralization, i.e., the swallowing up of the small capitalists by the big and their deprivation of capital” (244–5). And it is specifically with respect to such large firms that accumulation is related predominantly to total profit; for as we have seen, the “motive force of capitalist production” – namely the profit rate – is said to be threatened with “extinction” by the advent of monopoly capitalism, or a “few established big capitals.”(258). “What worries Ricardo” – who wrote in an earlier period of predominantly small firms – “is the fact that the rate of profit, the stimulating principle of capitalist production, the fundamental premise and driving force of accumulation, should be endangered by the development of production itself ” (emphasis added). It seems fair to conclude that the functional relation between the rate of return and accumulation presupposes the small traditional capitalist or factory owner.