Academic economists have recently returned from the elaboration of
static equilibrium to the classical search for a dynamic model of a
developing economy. Rosa Luxemburg, neglected by Marxist and academic
economists alike, offers a theory of the dynamic development of
capitalism which is of the greatest interest. The book is one of
considerable difficulty (apart from the vivid historical chapters), and
to those accustomed only to academic analysis the difficulty is rendered
well-nigh insurmountable by the Marxist terminology in which it is
expressed. The purpose of this preface is to provide a glossary of
terms, and to search for the main thread of the argument (leaving the
historical illustrations to speak for themselves) and set it out in
simpler language.
The result is no doubt too simple. The reader must sample for himself
the rich confusion in which the central core of analysis is imbedded,
and must judge for himself whether the core has been mishandled in the
process of digging it out.[1]
Our author takes her departure from the numerical examples for simple
reproduction (production with a constant stock of capital) and expanded
reproduction (production with capital accumulating) set out in volume ii
of Marx's _Capital_. As she points out,[2] Marx completed the model for
simple reproduction, but the models for accumulation were left at his
death in a chaos of notes, and they are not really fit to bear all the
weight she puts on them (Heaven help us if posterity is to pore over all
the backs of old envelopes on which economists have jotted down
numerical examples in working out a piece of analysis). To follow her
line of thought, however, it is necessary to examine her version of
Marx's models closely, to see on what assumptions they are based
(explicitly or unconsciously) and to search the assumptions for clues to
the succeeding analysis.
To begin at the beginning--gross national income (for a closed economy)
for, say, a year, is written _c + v + s_; that is, constant capital,
variable capital and surplus. Variable capital, _v_, is the annual wages
bill. Surplus, _s_, is annual rent, interest, and net profit, so that
_v + s_ represents net national income. (In this introduction surplus is
used interchangeably with rent, interest and net profit.) Constant
capital, _c_, represents at the same time the contribution which
materials and capital equipment make to annual output, and the cost of
maintaining the stock of physical capital in existence at the beginning
of the year. When all commodities are selling at normal prices, these
two quantities are equal (normal prices are tacitly assumed always to
rule,[3] an assumption which is useful for long-period problems, though
treacherous when we have to deal with slumps and crises). Gross receipts
equal to _c + v + s_ pass through the hands of the capitalists during
the year, of which they use an amount, _c_, to replace physical capital
used up during the year, so that _c_ represents costs of raw materials
and wear and tear and amortisation of plant. An amount, _v_, is paid to
workers and is consumed by them (saving by workers is regarded as
negligible[4]). The surplus, _s_, remains to the capitalists for their
own consumption and for net saving. The professional classes (civil
servants, priests, prostitutes, etc.) are treated as hangers-on of the
capitalists, and their incomes do not appear, as they are not regarded
as producing _value_.[5] Expenditure upon them tends to lessen the
saving of capitalists, and their own expenditure and saving are treated
as expenditure and saving out of surplus.
In the model set out in chapter vi there is no technical progress (this
is a drastic simplification made deliberately[6]) and the ratio of
capital to labour is constant (as the stock of capital increases
employment increases in proportion). Thus real output per worker
employed is constant (hours of work per year do not vary) and real wages
per man are constant. It follows that real surplus per man is also
constant. So long as these assumptions are retained Marxian _value_
presents no problem. _Value_ is the product of labour-time. _Value_
created per man-year is constant because hours of work are constant.
Real product per man year being constant, on the above assumptions, the
_value_ of a unit of product is constant. For convenience we may assume
money wages per man constant. Then, on these assumptions, both the
money price of a unit of output and the _value_ of a unit of money are
constant. This of course merely plasters over all the problems of
measurement connected with the use of index numbers, but provided that
the technique of production is unchanging, and normal prices are ruling,
those problems are not serious, and we can conduct the analysis in terms
of money values.[7] (Rosa Luxemburg regards it as a matter of
indifference whether we calculate in money or in _value_.[8])
The assumption of constant real wages presents a difficulty which we may
notice in passing. The operation of the capitalist system is presumed to
depress the level of wages down to the limit set by the minimum
subsistence of the worker and his family. But how large a family? It
would be an extraordinary fluke if the average size of family supported
by the given wage of a worker were such as to provide for a rate of
growth of population exactly adjusted to the rate of accumulation of
capital, and she certainly does not hold that this is the case.[9] There
is a reserve army of labour standing by, ready to take employment when
the capitalists offer it. While they are unemployed the workers have no
source of income, but are kept alive by sharing in the consumption of
the wages of friends and relations who are in work.[10] When an increase
in the stock of capital takes place, more workers begin to earn wages,
those formerly employed are relieved of the burden of supporting some
unemployed relations, and their own consumption rises. Thus either they
were living below the subsistence minimum before, or they are above it
now. We may cut this knot by simply postulating that real wages per man
are constant,[11] without asking why. The important point for the
analysis which we are examining is that when employment increases the
total consumption of the workers as a whole increases by the amount of
the wages received by the additional workers.[12]
We may now set out the model for simple reproduction--that is, annual
national income for an economy in which the stock of capital is kept
intact but not increased. All output is divided into two departments:
I, producing capital equipment and raw materials, (producers' goods),
and II, producing consumption goods. Then we have