Henryk Grossmann

Henryk 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.

Grossmann'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.

Contents

1 Early life and education 2 Career 3 Contribution to Theory 3.1 The logical and mathematical basis of the law of breakdown 3.2 The formula 3.3 Discussion of the formula 4 Influence

Early life and education

Grossmann was born into a relatively prosperous Jewish family in Kraków, then a part of Austrian Galicia. He went to Vienna to study, where his tutors included economist Eugen von Boehm-Bawerk and the "orthodox" marxian historian Carl Grunberg. With the destruction of the Austro-Hungarian empire at the end of World War I, Grossmann became an economist in Poland, with communist sympathies acquired during the war.

Career

From 1922 to 1925, Grossmann was Professor of economics at Warsaw University. He emigrated in 1925 to escape persecution at the hands of Pilsudski's regime. He was invited to join the marxian Institute for Social Research in Frankfurt by his former tutor, Grunberg. From 1930 onwards, after Max Horkheimer took the helm at the Institute, Grossmann rapidly became disenchanted with what appeared to him to be a degeneration into non-marxist or even anti-marxist projects of the Frankfurt School.

Though apparently never a member of the German Communist Party, Grossmann had remained a supporter of the USSR longer than his colleagues in Frankfurt. 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 - 1945. He spent the last five years of his life in East Germany.

Grossmann's work was finally made available in English translation in 1979 by Jairus Banaji, for an Indian Trotskyite organisation, the Platform Tendency. A recent edition is: ISBN 0745304591

Contribution to Theory

While at Frankfurt in the mid-1920s, Grossmann 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:

<math>k + {a_{c}.c\over 100} + {a_{v}.v\over 100}<math>

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

Further, let
<math> r = 1 + {a_c\over 100}<math>

and let
<math> w = 1 + {a_v\over 100}<math>

The formula

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

<math>c_j = c_{o}.r^j<math>

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

<math>v_j = v_{o}.w^j<math>

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

<math>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} <math>

whence

<math> k = {v_{o}.w^{j} (s - a_{v})\over 100} - {c_{o}.r^{j}.a_c\over 100}<math>

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

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

k = 0 for a year n, if:

<math> {v_{o}.s^{n} (s - a_{v})\over 100} = {c_{o}.r^{n}.a_c\over 100}<math>

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:

<math>{(r)^n\over s} = {s - a_v\over \Omega.a_c}<math>

whence n =

<math> {log \left( \frac{s - a_v}{\Omega.a_c} \right)} \over {log \left( \frac{100 + a_c}{100 + a_v} \right)} <math>

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:

1. The level of organic composition Ω. The higher this is the smaller the number of years. The crisis is accelerated.
2. 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.
3. 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.
4. 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:

1. the rate of accumulation of the constant capital a_c is reduced, and the tempo of accumulation slowed down;
2. the constant capital is devalued which again reduces the rate of accumulation a_c;
3. 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;
4. 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 Grossmann'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:

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

Influence

Grossmann'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 [1981] Economic Crisis and Crisis Theory published by Merlin Press is an accessible introduction and discussion derived from Grossman's work.de:Henryk Grossmann no:Henryk Grossmann