Dynamics of accumulation,

overaccumulation and the first-

cut theory of crisis
Ivn Emilio Montenegro Perini
Chapter 6: Dynamics of accumulation
Capital volume 1: The production of surplus value and the general
law of capitalist accumulation
Production of surplus value, rate of exploitation and technological and
organizational changes
Capital volume 2: Accumulation through expanded reproduction
explore the conditions that would enable accumulation through exchanges of
commodities between different sectors of an economy.
Capital volume 3: The falling rate of profit and its countervailing
influences
it is synthesized the findings of the first two volumes and explore the
contradictions of capitalism
 The production of surplus value and the
general law of capitalist accumulation
Two models:
The first excludes technological and organizational changes. accumulation
generated by an increment of the working class.
The second: technological an organizational changes can be used as means to
sustain accumulation in the face of labour scarcity. Reduction of demand for
variable capital in relation to the total capital advanced, increase in the actual
rate of exploitation (s/v) and the accumulation.
A portion of the workforce is, in short, thrown out of work and replaced by machines.
Relative surplus population' or 'industrial reserve army
unemployment and an endemic crisis of working class
Regulation of wage rates
tips the balance of class struggle in production to capital's advantage.
The production of surplus value and the
general law of capitalist accumulation
A potential conflict between the need to economize on variable
capital to increase the rate of exploitation and the need to control the
labour force by strong economic ties of dependency.
Denaturalization of classic political economy view of poverty and
growth of population as natural pattern. Every specific historic mode
of production has its own special laws of population.
Marx points out that accumulation and growth of population must be
understood as an integrated whole.
Harvey: the social relations of capitalism have penetrated slowly into
all spheres of life to make wage labour the general condition of
existence.
 Accumulation through expanded reproduction
Department 1 Simple reproduction
produces fixed and Department 1 C1 + V1 + S1 = W1
circulating constant Department 2 C2 + V2 + S2 = W2.
capital - use values
destined for
productive With accumulation (expanded reproduction)
consumption.
Department 1 C1 + V1 + S1 + ^C1 + ^V1 = W1
Department 2 Department 2 C2 + V2 + S2 + ^C2 + ^V2 = W2
produces use values
for individual C = Constant capital
consumption - V = Variable capital
necessities for ^C = Additional means of production (constant capital)
workers and luxuries ^V = Additional variable capital
for the bourgeoisie S0 = surplus value that remains for consumption after
(Harvey, 1982: 167). reinvestment in additional means of production and additional
variable capital.
 Accumulation through expanded reproduction
Equilibrium in this system, means of production in Department 1 (W1) equal
to the demand for means of production in both Departments 1 and 2
(C1 + ^C1 + C2 + ^C2) = C1 + V1 + S1 + ^C1 + ^V1
C2 + ^C2 = V1 + ^V1 + S01.

Department 2 have to raise their rate of reinvestment in the second year and
every year thereafter from 20 to 30 percent. But there is no economic logic in
this manner of doing so.
Accumulation through expanded reproduction
Can capitalism continue to accumulate in perpetuity?
This equilibrium is not really easy to fulfil
Restrictive assumptions:
Constant technology
Money functions purely as a means of payment
There is no hoarding
The surplus value produced in one department cannot be invested in another;
There is no equalization in the rate of profit
There is an infinite supply of labour power
Accumulation through expanded reproduction
There are some issues which Harvey rescue in the proposal
the reproduction of labour power becomes integrated into the
circulation of capital. The effective demand of the working class -
which depends on the wage rate becomes a factor that can
contribute or detract from balanced growth (Harvey, 1982: 172).
The social processes of wage determination - inter-capitalist
competition, class struggle, etc. - are such as to ensure that this
equilibrium is achieved only by accident (Harvey, 1982: 172)
Accumulation through expanded reproduction
Harvey points out that the conditions that permit equilibrium to be
achieved in the realm of production contradict the conditions that
permit equilibrium to be achieved in the realm of exchange.
Capitalism cannot possibly be in such a state that it can satisfy these
conflicting requirements simultaneously (Harvey, 1982: 176).
 The falling rate of profit and its countervailing
influences
The model aims to depict the internal contradictions of capitalism.
Tendency towards a falling rate of profit at the same time and the
origins of crises under capitalism.
/ Rate of exploitation
P=
1+/ Organic composition of capital
The rate of exploitation can increase only at a decreasing rate.

The value composition of capital tends to rise without restraint.

The falling rate of profit and its countervailing
influences
Marx asks why the falling rate of profit has not been greater and more rapid.
Counteracting influences in Capital
a rising rate of exploitation albeit at a decreasing rate;
falling costs of constant capital (which checks the rise in value composition)
depression of wages below the value of labour power
an increase in the industrial reserve army (which preserves certain sectors
from the ravages of technological progress by lessening the incentive to
replace labour power by machines) (Harvey, 1982: 178).
'the constant devaluation of a part of the existing capital.
creation of new branches of production
monopolization is treated as an antidote to the falling rate of profit
 The falling rate of profit and its countervailing
influences
Marx claims that counteracting influences cannot successfully counter the long-
run tendency towards a falling rate of profit.
Example:
Technological changes that reduce the value of fixed and circulating constant
capital can, under the right conditions, raise the rate of profit or at least
counteract its supposed tendency to fall.
For example, Morishima (1973, pp. 1 60-3 ) and Heertje (1977) show that a
special distribution of technological change - one that focuses in particular on
certain sectors within Department 1, which produces means of production -
can lead to a stable or even declining value composition of capital in the
economy as a whole. [] An economy dedicated to the production of
machines by ever more sophisticated machines sounds somewhat insane, of
course, but the technical possibility that it could stabilize the value
composition of capital does indeed exist (Harvey, 1982: 179).
The falling rate of profit and its countervailing
influences

Harvey: Technological changes in response to competitive pressures

and the state of class struggle the stabilized value composition of
capital will be achieved by accident No rational application of
technological change.
The falling rate of profit and its countervailing
influences
Fundamental preposition of the falling rate of profit
What Marx in effect shows us is that individual capitalists - coerced by
competition, trapped by the necessities of class struggle and responding to
the hidden dictates of the law of value - make technological adjustments
which drive the economy as a whole away from 'a normal development of
the process of capitalist production (Harvey, 1982: 188)

How on earth can the processes of technological and organizational change,

as regulated by individual capitalists acting under the class relations of
capitalism, ever achieve the viable technology to permit balanced
accumulation and the reproduction of class relations in perpetuity? (Harvey,
1982: 189)
Chapter 7: Overaccumulation, Devaluation and the
"First-cut Theory of Crisis
The tendency of the profit rate to fall 'breeds overproduction,
speculation, crises and surplus capital alongside surplus population.
OVERACCUMULATION AND DEVALUATION OF CAPITAL
The social imperative 'accumulation for accumulation's sake', produces
a surplus of capital which is not easy to employ in the circulation of
capital (Overaccumulation).
The tendency towards overaccumulation must be counterbalanced by
processes that eliminate the surplus capital from circulation
(Devaluation of capital).
 OVERACCUMULATION AND DEVALUATION OF
CAPITAL
Devaluation as a 'necessary moment' in the circulation of value.
Since capital is value in motion, value can remain value only by
keeping in motion.
Devaluation: value that is 'at rest' in any particular state for more than
a moment.
Supply does not necessarily create its own demand
Devaluation is the underside to overaccumulation to understand
the permanent ill-effects of the contradictory laws of capitalism.
THE CONSTANT DEVALUATION' OF CAPITAL WHICH
RESULTS FROM THE RISING PRODUCTIVITY OF
LABOUR
The rising productivity of labour under capitalism is therefore
accompanied by falling unit values of commodities
For instance, the perpetual hunt for relative surplus value which
generates incessant revolutions in value always threaten the value of
past labour that has not yet been realized through production or final
consumption.
Devaluation of labour power - Marx in pointing out that the
development of productive power is followed by a partial
depreciation of capital, also points out that when this depreciation is
felt in competition, the burden falls on the labourer, increasing the
exploitation in order to get indemnification
DEVALUATION THROUGH CRISES

Overaccumulation is countered by the 'withdrawal and even partial

destruction of capital' (Harvey, 1982: 200)
Destruction of capital
Machinery which is not used is not capital.
Labour which is not exploited is equivalent to lost production.
Raw material which lies unused is no capital.
Buildings (also newly built machinery) which are either unused or remain
unfinished are not capital
commodities which rot in warehouses are not capital
A part of the gold and silver lies unused does not function as capital.
 DEVALUATION THROUGH CRISES

The destruction of capital has effects in the reproduction of classes.

Capitalists and capitalists
fight between hostile brothers
Capitalists and working-class relations
The labourers lucky enough to preserve their jobs are almost certainly likely to suffer a
diminution in the wages they receive, which means at least a temporary depreciation in the
value of labour power which can, under the right circumstances, be translated into a
permanent reduction in that value. Competition among the workers will be exacerbated
CONCLUSIONS
Paradox:
The highest development of productive power together with the
greatest expansion of existing wealth will coincide with depreciation
[devaluation] of capital, degradation of the labourer, and a most
straitened exhaustion of his vital powers. [] Yet these regularly
recurring catastrophes lead to their repetition on a higher scale, and
finally to its violent overthrow (Harvey, 1982:
 Harvey, David. 1982. Limits to capital. Basil Blackwell, Oxford