Henryk Grossman

Henryk Grossman/Grossmann (1881-1950) was born in Kraków and studied law and economics in Kraków and Vienna. In 1925 he joined the Institute for Social Research in Frankfurt. He left Germany in the 1930s and returned to become Professor of Political Economy at Leipzig University in 1949.

Grossman's key contribution to political-economic theory was his book, The Law of Accumulation and Breakdown of the Capitalist System, a study in Marxian crisis theory. It was published in Leipzig months before the Wall Street Crash of 1929.

Early life and education

Grossman was born into a relatively prosperous Jewish family in Kraków, then a part of Austrian Galicia. He was the founding secretary and theoretician of the Jewish Social Democratic Party of Galicia in 1905. At the end of 1908, he went to Vienna to study the marxian economic historian Carl Grunberg. With the destruction of the Austro-Hungarian empire at the end of World War I, Grossman became an economist in Poland, and joined the Polish Communist Party.

Career

From 1922 to 1925, Grossman was Professor of economics at the Free University of Poland in Warsaw. He emigrated in 1925 to escape political persecution. He was invited to join the marxian Institute for Social Research in Frankfurt by his former tutor, Grunberg.

Hitler's accession to power in 1933 forced him first to Paris, and then via Britain to New York, where he remained in relative isolation from 1937 until 1949. In that year he took up a professorship in political economy at the University of Leipzig in East Germany.

Grossman's Law of Accumulation and Breakdown of the Capitalist System was finally made available in English translation in 1979 by Jairus Banaji, for an Indian Trotskyist organisation, the Platform Tendency. A recent edition is: ISBN 0745304591. However, it is a condensed version and lacks the important concluding chapter of the German original.

Contribution to Theory

While at Frankfurt in the mid-1920s, Grossman contended that a "general tendency to cling to the results" of Marx's theory, in ignorance of the subtleties of "the method underlying Capital", was causing a catastrophic vulgarisation of marxian thought - a trend which was undermining the revolutionary possibilities of the moment.

The Law of Accumulation was his attempt to demonstrate that marxian political economy had been underestimated by its critics - and by extension that revolutionary critiques of capitalism were still valid. Amongst other arguments, it sets forth the following demonstration (for a complete definition of the terms employed, the whole book is recommended):

The logical and mathematical basis of the law of breakdown

... Apart from the arithmetical and logical proofs that we have been given already, mathematicians may prefer the following more general form of presentation which avoids the purely arbitrary values of a concrete numerical example.

Meaning of the symbols

c = constant capital. Initial value = c_o. Value after j years = c_j
v = variable capital. Initial value = v_o. Value after j years = v_j
s = rate of surplus value (written as a percentage of v)
a_c = rate of accumulation of constant capital c
a_v = rate of accumulation of variable capital v
k = consumption share of capitalists
S = mass of surplus value, being:

$k+{a_{c}.c \over 100}+{a_{v}.v \over 100}$

Ω = organic composition of capital, or c:v
j = number of years

Further, let
$r=1+{a_{c} \over 100}$

and let
$w=1+{a_{v} \over 100}$

The formula

After j years, at the assumed rate of accumulation a_c, the constant capital c reaches the level:

$c_{j}=c_{o}.r^{j}$

At the assumed rate of accumulation a_v, the variable capital v reaches the level:

$v_{j}=v_{o}.w^{j}$

The year after (j + 1) accumulation is continued as usual, according to the formula:

$S=k+{c_{o}.r^{j}.a_{c} \over 100}+{v_{o}.w^{j}.a_{v} \over 100}={s.v_{o}.w^{j} \over 100}$

whence

$k={v_{o}.w^{j}(s-a_{v}) \over 100}-{c_{o}.r^{j}.a_{c} \over 100}$

For k to be greater than 0, it is necessary that:

${v_{o}.w^{j}(s-a_{v}) \over 100}>{c_{o}.r^{j}.a_{c} \over 100}$

k = 0 for a year n, if:

${v_{o}.w^{n}(s-a_{v}) \over 100}={c_{o}.r^{n}.a_{c} \over 100}$

(Note this line follows the German original in Das Akkumulations- und Zusammenbruchsgetz des kapitalistischen Systems (zugleich eine Krisentheorie), because it is misspecified in the condensed English translation.)

The timing of the absolute crisis is given by the point at which the consumption share of the entrepreneur vanishes completely, long after it has already started to decline. This means:

${(r)^{n} \over s}={s-a_{v} \over \Omega .a_{c}}$

whence n =

${log\left({\frac {s-a_{v}}{\Omega .a_{c}}}\right)} \over {log\left({\frac {100+a_{c}}{100+a_{v}}}\right)}$

This is a real number as long as s > a_v

But this is what we assume anyway throughout our investigation. Starting from time-point n, the mass of surplus value S is not sufficient to ensure the valorisation of c and v under the conditions postulated.

Discussion of the formula

The number of years n down to the absolute crisis thus depends on four conditions:

The level of organic composition Ω. The higher this is the smaller the number of years. The crisis is accelerated.
The rate of accumulation of the constant capital a_c, which works in the same direction as the level of the organic composition of capital.
The rate of accumulation of the variable capital a_v, which can work in either direction, sharpening the crisis or defusing it, and whose impact is therefore ambivalent.
The level of the rate of surplus value s, which has a defusing impact; that is, the greater is s, the greater is the number of years n, so that the breakdown tendency is postponed.

The accumulation process could be continued if the earlier assumptions were modified:

the rate of accumulation of the constant capital a_c is reduced, and the tempo of accumulation slowed down;
the constant capital is devalued which again reduces the rate of accumulation a_c;
labour power is devalued, hence wages cut, so that the rate of accumulation of variable capital a_v is reduced and the rate of surplus value s is enhanced;
finally, capital is exported, so that again the rate of accumulation a_c is reduced.

These four major cases allow us to deduce all the variations that are actually to be found in reality and which impart to the capitalist mode of production a certain elasticity ...

Much of the remainder of Grossman's book is devoted to exploring these "elasticities" or counter-crisis tendencies, tracking both their logical and their actual, historical development. Examples of each would include:

Depressed interest rates, investment capital transferred to unproductive speculation, eg housing stock, art objects.
Enlarged state sector bleeds value from the accumulation process via taxes. Wars destroy capital values.
'Reserve army' of labour (unemployed) created to discipline wage claims.
Imperialism

Influence

Grossman's work has been of slight influence beyond the small fraction of the many Trotskyist political currents that have maintained awareness of it.

Paul Mattick's Economic Crisis and Crisis Theory published by Merlin Press in 1981 is an accessible introduction and discussion derived from Grossman's work.

External Links

Rick Kuhn 'Capital development' Socialist Review 245, October 2000. A short biography of Henryk Grossman.

Preprint version of Rick Kuhn 'Economic crisis and socialist revolution: Henryk Grossman’s Law of accumulation, its first critics and his responses’ Paul Zarembka and Susanne Soederberg (eds) Neoliberalism in crisis, accumulation and Rosa Luxemburg's Legacy: Research in Political Economy 21 Elsevier, Amsterdam 2004 pp. 181-22. A discussion of aspects of Grossman's contribution to the Marxist theory of economic crisis.