Grossman’s Breakdown Theory Versus Marx’s Value Theory

Although Henryk Grossman and his followers have claimed that his theory of capitalist economic breakdown is rooted in Marx’s value theory, it is shown here that the two theories are actually incompatible. Marx’s value theory implies that Grossman’s breakdown tendency does not exist, because even though consumed constant capital grows faster than variable capital and surplus-value, the growth rates must eventually converge. Grossman’s failure to recognize this is most likely due to an incorrect assumption that an unending rise in the ratio of constant to variable capital must be a limitless one. It is also shown here that Grossman’s breakdown condition – insufficient surplus-value to fund capital accumulation – and the breakdown tendency and falling rate of profit of the Bauer–Grossman reproduction scheme have nothing to do with value or value theory. They are all physical phenomena in disguise, produced by Grossman’s implicit constraint on the production of physical output and the resulting disappearance of the physical net product. These defects are traced to a methodological problem, Grossman’s inversions of cause and effect. The chapter also argues that empirical phenomena that seem to confirm the breakdown theory do not actually do so and that the relevant defects of the breakdown theory are absent from Marx’s actual theory.