Grossmann's dynamics

jones/bhandari djones at uclink.berkeley.edu
Wed Oct 11 20:12:47 MDT 1995


Henryk Grossmann, 1941:

In contrast to the dominant view, Marx showed that no mechanism of
equalization exists, in the snese of an adjustment of prduction to deamdn.
For marx an orientation to consumption, i.e., adjustment of proudction to
demand, was a characteristic of capitalism's youth, ther period before the
arrival of modern large-scale industry, when there was yet no large fixed
capital.  There can be no talk of such an 'adjustment' of production to
demand in the present-day, where fixed capital constitutes a predominant,
and growing, share of total capital the industrialist ignores the 'command
of the market' to curtail production, which is supposedly expressed in
falling prices.  In fact, the characteristic of the highly developed
capitalist economy is that it is directed towards production rather than
consumption, i.e. production precdes demand, which results in an inherent
tendency, for reasons dealth with previously, to periodic over-production
of durable 'fixed' capital, for which no profitable use can be found.  But
because there is a tendency to overproduction in the sphere producing fixed
capital,  a form of competition necessarily arises which does not operate
to equalise supply and demand.  Where overproduction means there is no
living space (market) for all firms, the individual firm finds it necessary
to save itself from collapse at theexpense of all the others.  Far from
curtailing output when prices are falling, every firm with access to the
necessary means seeeks to produce more cheaply than its competititors, and
at a a profit, by introducing improved and cheaper techniques and by an
expansion in the scale of production.  Hence, the constant overproduction
of fixed capital constitutes a permanent force for the continuous
revolutionising of the techniques of production, and through this for
constant revolutions in value, which are a characteristic feature of this
mode of production. And although the constant improvements in techniques
and the expansion of scale of production aggravate the general
overproduction, the individual capitalist has, nevertheless, secured the
profitability and markets for this own progressive plant.

"Thus, the pressure of the initial overproduction serves to propagate the
transformation of the entire structure of the capitalist mechamism over the
whole breadth of society: at one pole, the victory of the new, higher,
technology and, at the same time, the enlarged scale of the individual
plant; the extra profits which are thus attained attract new entrants, the
movement become more generalised and an 'upswing' occurs.  But this does
prevent that at the other pole of society, an increased threat is
simultaneously posed to all those plants with backward techniques, because
of falling prices and overproduction, along with pressure to withdraw
altogether from competition, precisely as a result of the spreading of
imporoved techniques and associated revolutions in value (reduction in
socially necessary labor time).  However, since the scale of those few new
large plants exceeds the productive caapcity of the many small plants which
fail, the ned result of this movement is a growth in the overall scale of
production in society.  This movement takes place repeatedly, as the new
plants with the most modern techniques soon lose their priviliged position
because the of the generalized application of technical innovations, which
means the whole game must continuously restart.

"Under the pressure of periodically occurring overproduction, the drive
towards the constant revolutionising of techniques, and hence 'periodic
revolutions in value' is strengthened.  The capitalist who yesterday was
able to make a surplus profit by the introduction of a new process, is
today threatened by newcomes with even better techniques, and has to be
content with the average rate of profit; tomorrow he may not even cover his
costs or may even register a loss, and will have topull out of the market.
It is the permanent hunt for extra profit, a continual attempt to secure a
priviliged island, if only temporary, of surplus profit for the individual
capitalist's own plant by the revolutionising of technique. the 'real
movment' which we have described whos that one cannot speak of an
'adjustment' of production to demand; rather, production constantly races
haead of demand, an the 'regulative function of the price mechanism does
not in fact operate.  Far from leading to cutbacks in production,periods of
falling prices were in the past,and still are today, periods of exceptional
technique progress and expansion in production.  Inthe face of this now
evident failure in the construciton of the prevailing economic mechanism,
even the ruling theory beings to discover that instead of the alleged
tendency towards equilibrium, there exists a perpetuum mobile of change, a
tendency towards disequilibrium; that instead of the regulatory function of
the price mechanism, equalising supply and demand, situations can arise
where 'once destroyed, equilibrium is lost forever.'"



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