Review of Radical Political Economics Vol. 25(2)81-107(1993)

Capital Accumulation and Over-Accumulation Crisis: The Case of Greece (1960-1989)

EliasloakimoglouJohn Milios

ABSTRACT: In this paper, the concept of capital over-accumulation, formulated by Marx in Volume 3 of Capital, isdiscussed and adopted as the theoretical framework for the studyof capital accumulation and economic crisis in Greece in theperiod 1960-89. The empirical part of the analysis is based onthe investigation of a series of indices which reveal thehistorical trend of the social and economic relationsdetermining capital accumulation. It is thus shown that the mainfactor determining the economic crisis of Greek capitalism sincethe late seventies is the decreasing ability of the capitalistclass to economize on constant capital, which is the outcome ofthe social relation of forces established in the class-struggle.

INTRODUCTION

Greek capitalism developed with very high growthrates in the post-war period until the end of theseventies. Among the OECD countries, the economicperformance of Greece in the period 1962-79compares only with that of Spain and Japan.However, the high growth rates of Greek capitalismcame to an end in 1980, and have remained lowever since.The country's per capita Gross Domestic Product

(GDP) increased at constant market prices at anannual rate of 5.8% in the period 1951-60, 7.6%in the period 1961-70,5.6% in the period 1971-75,4.1% in the period 1976-80 and 1.6% in theperiod 1981-90.In the 1980s, the rapid decline of the country's

GDP growth rates, along with the deterioration ofnearly all other economic indices such as the rateof investment, the inflation index and employment,made it apparent that Greek capitalism had entereda period of economic crisis. The discussionconcerning the character and causes of this crisishas not abated.Conservative economists, as well as officials of

the present conservative government, argue thecrisis is a result of the "socialist experiments"of the previous socialist government, PASOK,(1981-88). They claim that wage increases and thepower gained by trade unions under PASOK ruleundermined the competitiveness of the Greekeconomy and discouraged Greek entrepreneurs frominvesting in their firms. According to theconservatives, the only way out of the crisis isto liberalize the Greek economy.

Athens, Greece.

® 1993 Union for Radical Political Economics.Published by Blackwell Publishers, 238 Main St., Cambridge, MA 02142, USA, and108 Cowley Rd., Oxford, OX4 1JF, UK.

The majority of progressive or leftisteconomists, as well a« socialist politicians,share the opinion that the crisis is a result ofthe structural problems of international and Greekcapitalism since the late 1970s. They claim thatthe harsh, restrictive austerity policy practicedby the present government merely aggravates theeconomic problems, reducing demand (the consumptionability of the working classes) and destroyingsocial consensus.In our opinion, the economic crisis of Greek

capitalism can be adequately interpreted only fromthe point of view of Marxist theory, which allowsthe consideration of the immanent mechanisms ofcapital valorization and accumulation. Withoutsuch an approximation to the development of the(Greek) capitalist economy, any general statementabout "structural problems of capitalism" becomesmeaningless. We believe that the Marxian conceptof over-accumulation of capital, developed mainly inVolume 3 of Capital, enlightens the immanentrelations determining the statistically attestedstagnation of the Greek capitalist economy in the1980s.In this paper, we begin by presenting and

discussing of the Marxian theory of over-accumulation of capital, which we propose as theinterpreting scheme of the capitalist economiccrisis (Section I). We then elaborate the empiricalpicture of capital accumulation in Greece duringthe period 1960-89, using a series of suitablestatistical indices, the development of which alsoindicates the developmental trend of the economicrelations Marx postulated (Section II). In thissection we also formulate some theoreticalconclusions with regard to the character of boththe economic crisis and the economic policyadopted by the ruling political powers in Greece.These conclusions are obtained by analyzing thestatistical data in relation to the theoreticalpremises presented in Section I and can beconsidered as a verification of these premises.The statistical data presented in Section II arethen used for a concise periodization of thedevelopment of Greek capitalism since 1960, bybriefly referring to the social background (socialrelation of forces) during each distinct period ofeconomic performance (Section III).

I. THE CONCEPT OF OVER-ACCUMULATION CRISIS FROM CAPITAL BY KARL MARX

Karl Marx presents one of his most famousdiscoveries, the law of the tendential fall of theprofit rate, in Part 3, Volume 3 of Capital. One ofthe chapters found in this part refers to thedevelopment of the law's internal contradictions, and includes asection which is entitled "Surplus CapitalAlongside Surplus Population" (Section 3, Chapter15). In this section Marx defines an over-

accumulation crisis. On comprehending the Marxiandefinition of capital over-accumulation, one isforced in one way or another, to confront thelogic of Capital; that is, the internal coherenceand the organization rules of the Marxian logicalconstructions.

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It was Gerard Dumenil (1978) who showed that thecapital is logically based upon the distinctionbetween internal and external determinations. Oneunderstands internal determinations as thenecessary relations in a given type of society,which remain unchanged and are constantly present,regardless of all the changes in historicaldevelopment. These relations are present eventhough they remain hidden beneath the surface ofeveryday events and the changes of economic,political or ideological conjuncture. Internaldeterminations constitute what Marx defined as the(capitalist) mode of production. On the contrary,the external determinations constitute thevariety of relations and events which do notoriginate from the unchanged structuralcharacteristics of the given type of society (modeof production), but from the changing mutualstrengths in the class struggle of theantagonistic classes, within one and the sametype of class power. For example, capitalistexploitation and surplus-value extraction areinternal determinations of every capitalistsociety. The fact that we are dealing with acapitalist society, though, does not indicate thatthe working day will be 12, 10 or 7 hours, thatthe welfare services will be more or lessextended, or that the workers' trade unions willbe strong or weak, etc. These last relationsbelong to the variety of external determinations(external to the structural relations thatconstitute the capitalist mode of production),which can take on many different forms indifferent countries, or in the differenthistorical phases of a capitalist society.The most valuable element in DumemTs analysis is

his study of the way these two forms of socialrelations interact with each other. Dumenil showedthat the external determinations do notconstitute any violation of the economic lawsarising from the internal determinations, nor arethey acting restrictively or in contradiction tothese laws. On the contrary, the externaldeterminations act only through the necessaryinternal relations. Their action therefore, ismediated by the economic laws. The formation ofthe value of the labor force, for instance, is notthe outcome of two independent factors actingseparately from one another - namely the sociallynecessary labor time for the production of theworkers' means of subsistence on the one hand, andthe political or trade union strength of theworking class on the other. These two factors donot produce any separate results which can then beadded or mutually revoked. The relations externalto the law (the results of the class struggle) actthrough the necessary internal relations. Thestrengthening of the working class causes anincrease in the socially necessary labor time and

therefore an increase in the value of the labor-force.Our presentation of the capital over-accumulation

concept shall therefore be based on thedistinction between internal determinations on theone hand (which are related to the economic laws),and external determinations on the other.The starting point of Marx's analysis is the

definition of the absolute over-accumulation. It can beregarded as a kind of preliminary definition

84 Elias Ioakimoglou and John Milios

which then leads to the definition of the relativeover~accuniulttinm. The absolute over-accumulationrefers to a boundary situation, which allows Marxto formulate a clear and comprehensible definition.(At this point, Marx adopts a methodology which iscommon in the natural sciences). We now followMarx's definition:

There would be an absolute over-production ofcapital as soon as no further additional capitalcould be employed for the purpose of capitalistproduction. But the purpose of capitalistproduction is the valorization of capital, i.e.appropriation of surplus labor, production ofsurplus-value, of profit. Thus as soon as thecapital has grown in such proportion to theworking population that neither the absolutelabor-time that this working population suppliesnor its relative surplus labor-value can beextended ...; where, therefore, the expandedcapital produces only the same mass of surplus-value as before, there will be an absolute over-production of capital; i.e. the expanded C+AC willnot produce any more profit, or will even produceless profit, than the capital C did before itsincrease by AC. In both cases there would even be asharper and more sudden fall in the general rate ofprofit, but this time on account of a change in thecomposition of capital which would not be due to adevelopment in productivity, but rather to a risein the money value of the variable capital onaccount of higher wages and to a correspondingdecline in the proportion of surplus labor tonecessary labor. (Marx 1981: 360).

First, a clarification must be made in the abovedefinition. In the case of capital over-accumulation, the fall in the profit rate is not theresult of a development in the labor-force'sproductive capacity (with a subsequent increase inthe organic composition of capital). This argumentis related to the fact that in chapters 13,14 and 15of the third volume of Capital, which precede thedefinition of over-accumulation, Marx had alreadyformulated and analyzed the law of the tendentialfall in the rate of profit as an outcome connectedwith the development of the productive capacity ofthe labor force. In the definition of absolute

over-accumulation Marx makes it clear, therefore,that he refers to a fall in the profit ratedetermined by factors other than in the case of thelaw of the tendential fall. In the case of absoluteover-accumulation, it is not the increase in thelabor productivity and the subsequent increase, atan even higher rate, in the organic composition ofcapital. It is the decline in the proportion ofsurplus labor to necessary labor (Marx 1981: 360).In other words, the determining factor in the fallof the profit rate is now the decrease in thesurplus-value rate. For reasons arising from thehistory of the labor and communist movement, thisMarxian argument has not been seriously consideredby Marxists, who tend to admonish that every fallin the profit rate is a result of an increase in theorganic composition of capital.

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Nevertheless, it is apparent that the profit ratedepends on two "variables": the surplus-value rateon the one hand, and the organic composition ofcapital on the other. One should note at thispoint, that Marx's definition quoted above seemsto take into consideration only the surplus-valuerate, that is, the relation between surplus laborand necessary labor. However, this "one-sided"analysis is not due to an omission or atheoretical mistake. It is connected with theapplication of an analytical method widely used inthe natural sciences and well-known to Marx. Thismethod is the study of the change of a specificquantity under the influence of the change ofanother quantity, taking into account that allother factors remain constant. The definition ofcapital over-accumulation focuses on the influenceof changes in the surplus-value rate (i.e., therate of exploitation of labor by capital) on theprofit rate, while all other factors, includingthe organic composition of capital, are regardedas constant. That is why Marx claims that over-accumulation of capital occurs when:

the capital is unable to exploit labor at thelevel of exploitation that is required by the"healthy" and "normal" development of thecapitalist production process (Marx 1981: 364).

The question that now arises is in what waydoes Marx study the combined effect of organiccomposition and surplus-value rate on the profitrate? Considering the profit rate to be thedependent variable (R), then the exploitation rate(S/V) and the organic composition of capital (C/V)will be the independent variables, according tothe following relation:

(1)

where S stands for surplus-value, V for thevariable part of capital (value of labor-force),and C for constant capital (value of the means ofproduction).As mentioned, Marx studies the influence of S/V

on R by considering C/V as a constant quantity inSection 3, Chapter 15, where he defines over-accumulation. On the contrary, when he elaboratesthe "nature of the law" of the tendential fall inthe profit rate in Chapter 13, he considers S/V asa constant quantity. Therefore, he successivelystudies the influence of the independent variableson the dependent one, in an effort to cover allpossible cases and factors that determine thechange of the dependent variable.The first assumption is that the organic

composition of capital remains unchanged. Thisleads Marx to the definition of capitaloveraccumulation. His argument with regard tochanges in the surplus-value rate is that anincreasing labor demand due to the capitalaccumulation ("as soon as capital has grown insuch proportion to the working population that..."(op. cit.)) will lead to a falling rate ofsurplus-value. This is due to the lack ofadditional workers (very low unemployment rate)and the subsequent

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increases of real wages. However, the surplus-value rate depends aim) on other factors, whichMarx does not seem to feel obliged to explain. Theabsolute labor time, on the one hand, does notdepend exclusively on the number of workers, butalso on the length of the working day. On theother hand, the relative labor time (i.e., therate of exploitation) does not only depend on thewages, but also on the increase in laborproductivity. These "omissions" by Karl Marxconcerning the definition of capital over-accumulation can be explained as follows:

*The length of the working day is purely an external relation with regardto the examined economic law, as we have explained above.

*The labor productivity is regarded as an unchangeable factor, exactly likethe organic composition of capital, the increase of which is "just anotherexpression for the progressive development of thesocial productivity oflabor" (Marx 1981:318).

Therefore we are not dealing with omissions inMarx's analysis, but with his scientific method ofabstraction. The economic law does not refer tothe concrete capitalist relations in a givensociety. It refers to their "kernel," or inherentelements of their specific structure, havingexcluded:

a) all the multiple external determinations, which occur in one form oranother, and depending on the changing economic, social andpolitical conjuncture in a given society, may not even exist.

b) all determinations which are considered temporarily constant, so thatthe effects of each "independent variable"on the "dependentvariable" become separately apparent.

The above statements shall now be considered inrelation to the concrete analysis of the concretereality, which is our final aim.Obviously the assumption of a constant organic

composition of capital shall be abandoned. Thismeans that when the decrease in the exploitationrate is being compensated by an even higherdecrease in the organic composition of capital,the profit rate will rise instead of fall.The following question shall be posed: Under what

circumstances does a decrease in the rate ofexploitation, (as Marx described it in Section 3,Chapter 15, Volume 3 of Capital) lead to a decreasein the profit rate and to an economic crisis? Thesame question can also be regarded as part of a

significant problem which was studied by Marxhimself: in what way is the surplus-value rate(rate of exploitation) transformed into profitrate? Marx deals with this problem in the firstpart of Volume 3 in Capital. Let us recall its title:"The transformation of surplus-value into profit,and of the surplus-value rate into rate ofprofit."Let us follow, then, the methodology of Karl

Marx. This time we will consider the surplus-value rate as a constant quantity and deal withthe

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relation between the organic composition of capitaland the profit rate. One could argue that thisproblem is stated and solved by Marx principally inpart 3, Volume 3, and more precisely in Chapter13. Here he deals with the famous law of thetendential fall in the profit rate, claiming thatthe increase in the productive force of laborcauses an increase in the organic composition ofcapital and a subsequent decrease in the profitrate. However, the organic composition of capitaldepends on a series of factors other than laborproductivity, which are considered here (Chapter13) as constant quantities. For this reason, ouranalysis shall focus its attention on part 1,Volume 3 of Capital (Chapters 1-7). Let the followingrelation guide us:

which means that:

where Y is the net product, that is, the sum ofsurplus-value and value of labor force (variablecapital).Equation (2) shows that the organic composition

of capital C/V can be analyzed by the rate ofsurplus value on the one hand, and the quantityC/Y, on the other. This last quantity expressesthe value of constant capital which is necessaryfor the production of one unit of product. Theincrease or decrease of this quantityillustrates, therefore, the ability of thecapitalist class to spare or economize on constantcapital. Marx himself devoted the whole of chapter5 to this subject (economy in the use of constantcapital). In this chapter we find the enumerationof all factors related to the ability ofcapitalists to economize on constant capital.Once again, in Chapter 5 of Capital, Marx follows

the abstraction method we described above. Heconsiders that the surplus-value rate is "given"(i.e., constant), "in order to avoid needlesscomplications" (Marx 1981: 171). He then describesthe factors which ensure or restrict economy inthe use of constant capital. Let us attempt tosummarize the main points of the Marxian analysis:

a) Lengthening of the workday or work year.The volume of fixed capital (factorybuildings, machinery, etc.) remains the same,whether work continues for 16 hours or for 12.The extension of the working day requires nonew expenditure on this, the most expensiveportion of the constant capital. (Marx 1981:170).

b) Concentration of the means of production and employment of them "ona massive scale" (Marx 1981: 175).

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c)Socially combined labor (concentration and cooperationof workers,social character of labor) (Marx 1981: 172).

d) Economy on the conditions of work at the expense of the workersThe contradictory and antithetical characterof the capitalist mode of production leads itto count the squandering of the life andhealth of the worker, and the depression ofhis conditions of existence, as itself aneconomy in the use of constant capital, andhence a means for raising the rate of profit(Marx 1981: 179).

There are, of course, forms of economy in the useof constant capital connected with an increase inlabor productivity:

e)Re-cycling of waste products (Marx 1981: 173-74). Productivity increasein sector I, (which produces means of production) (op. cit. p. 175).

f)Economy designated by the experience of the collective worker (Marx1981: 198-199).

g)Economy as a result of the appropriate education of the collective workerand his subordination to the factory despotism — that is thecapitalistrelations of production which are, at the same time, the relations ofpower:The fanaticism that the capitalist shows foreconomizing on means of production is nowcomprehensible. If nothing is to be lost orwasted, if the means of production are to beused only in the manner required by productionitself, then this depends partly on theworkers' training and skill and partly on thediscipline that the capitalist exerts over thecombined workers.... (Marx 1981: 176).

The analysis of Marx shows that the ability ofthe capitalist class to economize on constantcapital is not a "technical aspect" of theproduction process, but an outcome of the socialrelation of forces, that is a result of classstruggle.Increasing economy in the use of constant

capital presupposes an increasing power of thecapitalist class over the production processitself. It is often connected with a deteriorationof the workers9 economic and social status, as Marxshowed. On the other hand, economy in the use ofconstant capital "concerns the worker as littleas a horse is concerned with the expense of itsbit and bridle" (Marx 1981: 178).The fall in the exploitation rate is transformed

into a fall in the profit rate only in the casewhere it is not compensated for by economies in theuse of constant capital. On the contrary, an

increase in the factor illustrating the use ofconstant capital (factor C/Y) over a certainperiod (i.e., a fall in the "constant capitalefficiency," Y/C) may lead to a fall in the profitrate and an over-accumulation crisis, even in theinstance of a constant or slightly increasingexploitation rate. An increase in factor C/Y, thatis, the declining

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ability of the capitalist class to economize on constant capital, can again be the result of either a decrease in (Y/N) or an increase in (C/N), since:

where N is the number of workers, (Y/N) is the"apparent labor productivity/ assuming that thelength of the work year is constant, and (C/N) isthe constant capital intensity.It is worth mentioning at this point that since

the end of the 1970s, the process of restructuringa capitalist economy through the introduction ofmicro-electronic applications in capitalistproduction (automation of production), does notaim only to increase labor productivity and therebythe rate of exploitation. It also aims toeconomize considerably on the use of constantcapital.Let us now return to the theory of over-

accumulation crisis. The crisis itselfunavoidably results in a fall or deceleration indemand and thereby leads to an increase in theunemployed production capacity, that is, anincrease of the so-called capital intensity of thecapitalist economy.It is clear, though, that in our theoretical

approach we do not consider under-consumption asthe cause of economic crisis but as one of itsmajor effects, which then produces its own effectsin respect to the profit rate; that is, it feedsback into the crisis. The whole process takes onthe form of a "positive feedback," or a "viciouscycle." In our opinion, this "inner and necessaryconnection" between the elements of a capitalisteconomy in a conjuncture of over-accumulationcrisis is verified by the fact that in many cases(e.g., Greece), consumption increases during thewhole period that precedes the outbreak of thecrisis.As a conclusion of the above theoretical

analysis we can formulate the following statement:

Over-accumulation crisis is determined by twofactors, both being an eventual outcome of classstruggle: a decreasing exploitation rate oflabor and more decisively, a decreasing economyin the use of constant capital.

The investigation, therefore, of the empiricallydetectable characteristics of economic crisis inGreece (i.e., the verification that the Greekeconomic crisis has the character of an over-accumulation crisis) shall be based on thecombined application of two types of quantitativeindices: (a) indices approaching the rate of laborexploitation, (b) indices approaching factor C/Y,

and thereby the ability of the capitalist class toeconomize on constant capital.

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II. THE EMPIRICAL INVESTIGATION OF THE CRISIS. INDICES OF CAPITAL ACCUMULATION IN GREECE (1960-89)

The empirical investigation of capitalistaccumulation from the Marxian point of view isobliged to confront the fact that statistical datadoes not describe (or correspond to) the Marxianvalue-categories, but illustrates some"superficial phenomena11 of the economic processes.This fact gave rise to a dispute among Marxiansocial scientists, as to whether, or to whatextent, empirical reality can be approached bymeans of a Marxian use or interpretation ofstatistical data. In our opinion, the mostinteresting such discussion, which is worthmentioning here, is one which took place in W.Germany during the '70s (Altvater; Hoffmann;Schoeller; Semmler 1974-A & 1974-B, Diefenbach,Groezinger, Ibsen, Wartenpfuhl, Wengenroth: 1976,Altvater, Hoffmann, Semmler: 1976, Schoeller:1976, Busch: 1978). However, an analysis of thisdiscussion is not required for the purpose ofthis paper.In our opinion, the fact that empirically

detectable economic phenomena are the forms underwhich the "hidden" structural characteristics ofthe capitalist system (the economic laws discoveredby Marx) make themselves apparent(Erscheinungsformen: forms of appearance), allowsthe use of carefully selected statistical indicesunder certain presuppositions. These indices canbe used only as indications with regard to the wayeconomic laws act in a concrete society and for aconcrete historical period. They show the trend inthe development of the value relations.The indices are then just historical proxies of

value categories. As an example, the real wage isnot the value of the labor force. However, anincrease (or decrease) in the average real wagesin a certain country over a historical periodindicates a respective increasing (or decreasing)trend in the value of the labor force (in thegiven country and for the given historicalperiod). Our opinion is that Marx's wholeanalysis shows the conceptual unity of valuecategories and their forms of appearance.Otherwise, one would have to distinguish betweenthe "history of structures" on the one hand andthe "history of events" on the other, as twoprocesses independent from one another. However,such an assumption contradicts the Marxian theory.The indices selected for the present investigation are the following:

* The annual Net Output (Y) at market prices (NetValue Added calculated as the differencebetween Gross Value Added and the Consumptionof Fixed Capital). The historical change of

this index illustrates the trend of change ofthe sum variable capital + surplus value.

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* The annual changes of the Net Value Added (ΔΥ), that is the additionalannual Net Output in comparison with the previous year, e.g., ΔΥ1988= Y1988 —Y1987.

* The annual Net Fixed Capital Formation (I), which is the Gross FixedCapital Formation minus the Consumption of FixedCapital.

* The so-called "Productivity of Capital" or "Capital Efficiency," that isthe Output/Capital Ratio (Y/K) (Net Product/Fixed Capital Stock). Itshows the net value produced by means of a unit of fixed capital. It alsorepresents the reverse relation of index (K/Y),the historical change ofwhich illustrates the ability of capitalists to economize on constantcapital. A decreasing "Capital Efficiency" (increasing index K/Y) meansdecreasing economy in the use of constant capital.

* The so-called Marginal "Productivity of Capital," which is the MarginalOutput/Capital ratio (ΔΥ/Ι), that is, the increase of the Net Product perunit of new Fixed Capital Investment. This index reveals the historicaltrend of the ability of new investment to ensureeconomies in the use ofconstant capital.

* The Investment Rate (I/Y).* The Revenue of Labor or Labor Income (L) (wagesand salaries pluscompensation for those who are self-employed and contributions forsocial insurance paid by employers) and the average Revenue of Labor(L/N), that is, the Revenue of Labor over employment.

* The share of Net Value Added going to labor (L/Y). The changes of(L/Y) in real terms over a time period reveal the historical trend of therate of exploitation.

* The Rate of Profit or Rate of Return (R)

which is equivalent to

* The Marginal Rate of Profit (AR) on Fixed

which is equivalent to

that is the change of Profit (ΔΥ-AL) per unitof new Fixed Capital Investment (I), or theproduct of the Marginal Profit Quotient (1 -ΔL/ΔΥ) and the Marginal Output/Capital ratio(ΔΥ/Ι). This index illustrates the trendregarding the profitability of new investment.

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* The Capital Intensity (K/N), which relates the total capital atock K withthe applied labor force N and represents, therefore, an index of thetechnical composition of capital.

* The apparent productivity of labor (Y/N), that is, the Net Value Addedover the total employment.

The above indices were calculated both for theGreek economy as a whole, and for the manufacturingsector. The data was provided by the NationalAccounts of Greece. The calculation of the aboveindices is based on 1980 constant market prices,as well as current prices. The results of thecalculations are presented here for the Greekmanufacturing sector in the form of graphs, butthey are also available in the form of tables onIBM-compatible computer diskettes (for Greekmanufacturing as well as for the total economy).1

We continue by presenting only the graphs of theindices calculated for the manufacturing sector,for two reasons:

a)The indices calculated for the total economy show exactly the sametrends as the manufacturing indices. Their presentation would not,therefore, be of any benefit to the paper.

b) Data concerning the manufacturing sector is considered to be moreaccurate than data referring to the total economy.

At this point we will comment on the empirical results presented in the graphs, focusing our attention on the parameters of the economic crisis:

a) As Figure 2 shows, the rate of change of theapparent productivity of labor (Y/N) lagsbehind: (i) the growth rate of capitalintensity (K/N) since 1979, and (ii) the rateof change of the average real wage (L/N) duringthe period 1973-1985. As a consequence of thesedevelopments, the Output/Capital Ratio (Y/K) involume falls since 1979 (Figure 4), while theLabor Share (L/Y) rises in the time period 1973-85 (Figure 3). It is worth noticing at thispoint, that an index such as (Y/K) or (R)calculated in volume, illustrates the changesin the conditions of accumulation in a betterway than the same index calculated in value.Calculations in value also take intoconsideration the changes of relative prices (ofconsumption products and of capital goods as tothe prices of the net product) induced bymarket conditions and fluctuations.It is clear, then, that the decline in the

Profit Rate (R) of Greek manufacturing since1973 (Figures 6 & 7), can be attributed to the

combined effect of a squeeze on the share ofoutput going to profits ([Y-L]/Y, or 1 - [L/Y])and an increase in the Capital/Output Ratio(K/Y). However, in the most recent period since1985-86, there has been a deterioration of realwages (Figures 2 & 3). The latter did not leadto an increase in the Profit Rate (R) (Figures6 & 7), because of the continuing fall in theOutput/Capital Ratio (Y/K).

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Nevertheless, the de the net product (increasingprofit share) in combination with the lowerdecreasing rates of (Y/K) since 1984 resulted ina stabilization of the Profit Rate calculated involume, since the same year (Figure 6). Thesame parameters significantly boosted theMarginal Profit Rate (AR), that is theprofitability of additional investment, since1985 (Figure 8). b) The trend of the Rate ofAccumulation (I/K), as well as that of the NetFixed Capital Formation (I) in Greekmanufacturing has clearly changed from down to upin 1986 (Figure 9). This reversal hascontributed to a stabilization or only a modestincrease of the Marginal Output/Capital Ratio(ΔY/I) (Figure 5).

It is evident from our calculations that the samefactors affecting the profitability in the Greekmanufacturing sector also drive the Profit Rate(R) of the whole Greek economy to low levels. Allthe phenomena discussed above in relation to themanufacturing sector can be detected on the levelof the whole Greek economy as well.These empirical results support the hypothesis

of this paper, namely that the present crisis ofGreek capitalism has the character of a capitalover-accumulation. To be specific, the rapid fallin the profit rate is mainly the result of twoparameters:

a) The fixed capital stock (K) is increasing in higher rates than the product00 gained by means of this capital stock. This development has clearlymade itself apparent since 1979 (Figure 4), meaning that Greekcapitalists have failed to economize on constantcapital since that time.In the economical and political conjuncture of the late 1970s and '80s,the decreasing "capital efficiency" (i.e., the increasing factor K/Y) seemsto constitute the permanent major factor which pushes the profit ratedownwards.

b) The share of wages in the national income cannot be suppressed belowa certain level. This means that the restrictive austerity governmentpolicies face very strong opposition from the working class, which ismore or less succeeding in protecting its standard of living. Furthermore,Greek workers managed to increase their wages in the seventies andearly eighties, pushing the wage ratio (L/Y) upwards.

As can be seen in Figures 2 & 3, the first phaseof increase in real wages and of the factor L/Y

took place in the period 1974-78. This developmentwas connected with the overthrow of the militarydictatorship (1967-74), which had suppressed thelabor movement and decreased the labor share(L/Y). The restoration of parliamentary democracyis thus related to a decrease in theexploitation rate of the labor force in Greece(i.e., an increase in the labor share). Thisdevelopment coincided with stagnant "capitalefficiency" (Y/K), in the period 1974-79. Duringthis period, Greek capitalists did not succeed ineconomizing on constant capital any longer, as

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can be concluded from Figures (4) and (6). Theresult wan a decreams in the profit rate of Greekmanufacturing (Figure 6).The role of the banking system was also decisive

during this time period. Following the guidelinesof the government's economic policy, it aidedGreek capitalism in facing only a mild crisisuntil 1979. During the late 1970s the Greekcredit system functioned in a way which permittedthe continuation of production of non-profitableplants. This was done by adopting an inflationarymonetary policy. The section of means of productionthat in a classic crisis would have to bedestroyed continued to operate as capital, usingcredit with negative real interest rates. Thiseconomic policy also played an important role inthe early 1980s, when the capital efficiency Y/Kof the economy started to fall, thus pushing theprofit rate downwards with higher rates (Figure6).The Greek working classes strongly opposed the

restrictive austerity policy adopted by theconservative government from 1979-80, as thecrisis of the economy was becoming apparent. Inthe 1981 general elections, the overwhelmingmajority of the wage earning class voted for theLeft (48 % for the Socialist Party, PASOK, and 13%for the communists), which promised to follow apolicy of "re-distribution of wealth" to thebenefit of the working people. As can be concludedfrom Figure 3, the share of labor (L/Y) risesagain with high rates in the period 1981-85. Thecombination of a rapidly increasing K/Y with thelikewise increasing labor share (i.e., decreasingprofit share in the net product) results now in arapidly decreasing profit rate and an economiccrisis that corresponds to the Marxian concept ofcapital over-accumulation.The duration and sharpening of the economic

crisis led to a crisis in the PASOK government'seconomic policy. A temporary aggravation of thecountry's balance of payments in 1985 gavegovernment officials reason to accept that"healthy" conditions of capitalist productioncould be restored only when new investment raisedsurplus-value with a higher rate than it increasedthe capital stock. In order to obtain such aresult, either the level of exploitation (Y/L) orthe efficiency of capital (Y/K) had to increase,or both.The capitalist way out of the crisis

presupposes, therefore, a social and economicrestructuring of class power relations. To someextent, but not exclusively, that depends on theability of capital to reorganize the productionunit — the capitalist factory and enterprise. Inother words, it presupposes the devalorization ofall inadequately valorized capital, and thustremendous economizing in the use of constant

capital of the capitalist society as a whole. Thismeans a restructuring of the whole productionsystem, so that social-capital once more attains ahigh level of profitability. In any case, and fromthe capitalist point of view, the obstructions inrestructuring the production process, and thedecrease of real wages imposed on capital by thestrength of the working class, had to be removed.

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On abandoning its left Keynesian policy, thesocialist government functioned UN tui "executive"of the laws of capital accumulation, taking thelead in a new massive offensive of the bourgeoisieagainst the working class. For the first timesince the fail of the military dictatorship(1974), the economic policies of all major Greekpolitical parties have converged to a commonlyaccepted political line and ideological language:"restructuring of the production apparatus;development of the entrepreneurial sense of theeconomy's social partners, improvement of thecountry's position in the world market and benefitfrom the challenge of the European Single Market"are some of the common "passwords" that unite allGreek political parties, including the traditionalcommunist Left.In the 1986-91 period, and especially after the

formation of a new government of the Right inApril 1990, the process of devalorization of non-profitable capital developed faster than ever andwas reinforced by the devalorization of labor-force, resulting from the government's austereeconomic policy. However, the crisis of the Greekeconomy has not been overcome. As can be concludedfrom Figures 6 & 7, the profit rate remains low asa result of the still decreasing "capitalefficiency" (Y/K). The decreasing labor share(which indicates an increasing rate ofexploitation) cannot restore the high levels ofprofitability on its own unless it is"reinforced" by an "economy in the use of constantcapital" (see also relation (3) in Section 1 ofthis paper). Besides, the labor movement andconsequently the labor share itself cannot besuppressed as much as the ruling class would like.Although the nominal wage increases during the yearof conservative government (April 1990- April1991) were lower than the average inflation rateof that period (decreasing wages in real terms),they were significantly higher than the nominalwage increases initially "planned" by thegovernment's economic policy. It is also worthnoticing in this context, that the labor share inthe net product (L/Y), decreased in the period1985-87, only to increase again in the followingperiod 1988-89 (Figure 3).Closing our analysis of the factors which

apparently determine the Greek economic crisis, wecan advance our main conclusion: the profit ratedecreased with high rates in the period 1980-85under the combined influences of a falling profitshare ([1-L/Y]) and an increasing "capital/outputratio" (K/Y). In the period 1985-89, the profitrate calculated in volume remained stagnant at lowlevels, while the same index calculated in valuecontinued to decrease. In both cases this was dueto the continuing decrease in "capital efficiency"(Y/K), (i.e., the increasing "capital/output

ratio" K/Y). Therefore, the way out of the crisisseems to depend above all on a restructuring ofthe production system which will push the value of(K/Y) downwards, that is, it will significantlyeconomize on constant capital. However, Greekcapitalism has not yet succeeded in this aim.

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The result stated above definitively indicatesthat the crisis has the character of capitalover-accumulation, in the Marxian sense of theterm, as described in Section I of this paper.

III. THE HISTORICAL PHASES OF GREEK CAPITALISM SINCE I960

After discussing the empirical evidence concerningthe crisis of the Greek economy since the end ofthe 1970s, we will now attempt to reconstruct theparameters that influenced economic development inGreece during the whole period studied, by means ofthe indices-method. We can distinguish fourperiods of capital accumulation in Greece since1960, defined by the turning points in theevolution of both the main statistical indicesstudied and the country's economic and politicalconjuncture:

1960-73: The Golden Era of Greek Capitalism.By the early '60s Greek capitalism had entered along phase of economic boom and structural changesdefined by the two turning points that we haveidentified using the indices of capitalaccumulation: 1962 and 1973. During this period,Greek manufacturing developed its ability to mass-produce consumer products as well as means ofproduction. This wide variety of industries wasessentially based on the home market. Theyexpanded and flourished, keeping pace with thedevelopment of a mass-consumption economy on theone hand and the establishment and rise of amarket of means of production on the other.Since the early 1950s, Greek capitalism had

achieved a high level of exploitation of the laborforce by means of a combination of the most"traditional" and "modern" production methods. Tobe more precise, the production process was basedon production of relative surplus-value, as well asproduction of absolute surplus-value. According toour analysis, this was the real "comparativeadvantage" of Greek capitalism with respect toother, more developed capitalist countries. Thedevelopment of relative surplus-value productiondid not break up the traditional forms ofexploitation, at least until 1974, leaving enoughspace for the predomination of the absolutesurplus-value production, in some sectors.As can be seen in Figures 3, 4, 6 & 7, the period

1960-73 is characterized by the combination of anincreasing "capital efficiency" (Y/K) and adecreasing labor share (L/Y). The effect of thesetwo parameters is an increasing profit rate.This development can be understood in relation

to the status of the labor market and the classstruggle in post-war Greece. The civil war (1944 &1946-49) resulted in the military and politicaldefeat of the Left and the formation of a quasi-

totalitarian political regime of persecution andterror, not only against Left activists, but alsothe labor movement. Trade unionism

.................... 9 7

waa typically “free”, but in reality it wassuppressed with all means by the state. A processof political democratization, connected with animpressive political and trade unionistmobilization of the working people, was initiatedin the early 1960s. It was violently curtailed,though, by a military coup d' etat in April 1967.The military dictatorship then devoted itselfmainly to the suppression of the Left and thelabor movement.

1974-79: The First Period of the CrisisThe period 1974-1979 can be regarded as thepreliminary phase of the crisis, with highinflation rates, dramatically decreasing rates ofinvestment (I, Figure 9) and a rapid fall in themarginal profit rate AR (declining profitabilityof new investment). However, one could argue thatthe dynamic gained by Greek capitalism during itsgolden era, which started in the early 1960s, wasconserved until the end of the 1970s. The economymaintained sufficient strength, exports increasedfaster than ever and increasing real wages boosteddomestic demand. As already mentioned, theOutput/Capital Ratio (Y/K) in volume, wasstabilized after a fall in 1974 related to thefirst oil shock of the period, because of the highcapacity utilization rate. This development sloweddown the decrease in the profit rate, mainlycaused during this period by the substantialincrease of the labor share and the squeeze onthe profit share in the net product. Figure 11presents private consumption in constant prices,for the period of interest 1960-88. One noticesthe increasing private consumption, along with theincreasing labor share in the net product, duringthis preliminary phase of the crisis.What has happened since 1974 is that radical

change in the political and social relation offorces has benefitted the working class. Thisprocess became known as a "modernizing" of Greekcapitalism on the political, as well as theeconomic level. The political organization of theworking class, the emergence of trade unionismand the social agitation of the period 1974-78,forced capitalism to accept several changes infavor of the working class. This meant a"modernizing" of exploitation, or to be moreprecise, a retreat from absolute surplus-valueproduction methods. These changes practicallycoincided with the two oil shocks of 1973 and1979, which made the developing crisis apparent.The international economic conjuncture and theascension, since the 1960s, of Greek capitalism ininternational markets allowed the Greekbourgeoisie to cope with the new situation. Themost important outcome is Greece's joining theEEC in 1981.

1980-85: The Aggravation of the CrisisAs we mentioned in the previous section of thepaper, the period 1980-85 was the phase of acutecapitalist crisis per se. The worldwide recessionduring the period 1980-82, which lead to shrinkingexternal demand, caused a slowing down of exports.The economy stagnated in spite of strong internaldemand since the latter, boosted by increasing realwages, contributed mostly

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to price increases instead of investment. Theunemployment rate increased by more than 6% in thefour-year period 1979-83 (Figure 1). Low capacityutilization rates significantly contributed todecreasing Output/Capital Ratio (Y/K) and to afall in the Profit Rate. As can be concluded fromFigure 10, the Output/Capital Ratio, (i.e., Y/K),falls faster than ratio Y/K', where K' is the"employed fixed capital stock," (i.e., the fixedcapital stock K multiplied by the rate ofcapacity utilization). The fall in ratio Y/K'means that during the period examined, the idleproductive capacity constituted one factordetermining the fall in ratio Y/K, but not theonly factor.The first election victory by PASOK in 1981 was

followed by substantial real wage increases, evenby means of administrative resolutions — adevelopment of the welfare state (social securitypayments, pensions and health expenditures, whichhad been introduced in Greece on a rather modestscale until then). Significant changes in laborlegislation also followed, favoring the workingclass. By 1985, real wages in manufacturing were70% above those in 1974 and 15% above those in1981. At the same time, austerity triumphed inother European countries.To compensate for these changes favoring the

working class, the Socialist Party tried to obtaina consensus on working practices, industrialdiscipline, productivity increases andintensification of labor during that period.Social change was presented as a way out of thecrisis in the ideology of the Socialist Party andof the Greek Left as a whole. In other words, ameans of accelerating "economic development." Putdifferently, the economic policy for the years1981-85 was an application of left-Keynesianeconomics: demand boosted by real wage increaseswas supposed to become the "locomotive" of theeconomy, reducing unemployment, stimulatinginvestment and productivity, and bringing "socialpeace" to the workplace. Shutting down "non-economic" plants was postponed by means of creditand state intervention; money supply was not tightand real interest rates were negative.The government was thus expecting the economy to

respond to its high public expenditure policywith faster growth and investment. Morespecifically, Greek manufacturing was exposedmore than ever to international competition andfaced both a dramatic rise in wages and thedevelopment of the home market for consumerproducts. Yet it was expected, by governmentofficials, to respond by investing in new, moreefficient technology, keeping capacity utilizationrates high, introducing new organizationalprinciples and working practices, thus boostingproductivity.

By 1985 it became evident that this policy wasnot a success. Neither the working class nor thebourgeoisie responded positively. The consensuswas not achieved and workers refused to adopt an"enterprise culture," meaning the adoption of thevery logic of capital valorization. The workercontinued to regard "the social character of hiswork, its combination with the work of others fora common goal, as a power that is alien to him"(Marx 1981:

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178), Employers, on the other hand, reduced netinvestment. During the period 1981-85 the economystagnated, inflation was high and the profit ratecontinued its fall as a result of the squeeze on theprofit share on the one hand, and of the falling"productivity of capital" (increasing Capital/OutputRatio) on the other.What the Greek experience proves once more is

that a government of the Left is "condemned" toadminister capitalist interests, and sooner orlater to confront the working class, sincepolitical and economic power remains in the handsof capital. Moreover, in periods of economiccrisis, the bourgeoisie cannot "afford" any formof social-democratic economic policy, and it makesuse of all available means in order to overthrowit.

1986-91: Some Recovery of ProfitsIn October 1985, a few months after the secondelectoral victory of the Socialist Party, when itwas clear that the capitalist way-out of thecrisis was not provided by Keynesian economicpolicy, the socialist government finally proclaimeda restrictive economic policy of austerity. The neweconomic and political conjuncture gave rise to amassive workers' movement. This resulted in thehighest number of strikes and "lost working hours"(per year) in Greece since the 1960s, in thesubsequent period 1986-88. Massive retirementsfrom the Socialist Party of union officials and,members deepened its rift with the workers'movement. The employers' organizationsacknowledged, for the first time since 1981, thatthe government's economic policy was "realistic."By 1987, the Labor Share calculated in volume fellback to the levels of 1979 (Figure 3).The victory of the conservative party Nea

Dimocratia in the 1990 general elections gave anew force to the monetarist economic policy whichGreek governments followed during this lastperiod. It not only restricted demand by cuttingup wages, public services and public investment,but it also accelerated the shutting down ofnonprofitable plants; the so-called "enterprisesfacing problems." It became clear that thepreferable capitalist way of economizing onconstant capital is recession, which allows thecollective capitalist to "get rid of" theeconomically "ineffective," who burden the profitrate (the "ineffective" individual capitals andthe "ineffective" individuals being the aged,young, women, lower-unskilled strata of theworking class, etc.).The new conjuncture since October 1985 has not

lead to a way out of the crisis, since it did notmark a reversal in the falling trend of "capitalefficiency" (Y/K). It marked a new phase of the

crisis of Greek capitalism, though, which ischaracterized by:

(i) The decrease of the Share of Labor (L/Y) in the Net Output, (ii) The gradual modification of the relations of power in the factory in favor of capital (stabilization of the labor discipline, acceleration of the

100 filial loakimoglnu

Mm Mill"-.

restructuring process of Greek industry — aprocess that pushes the unemployment rateupwards etc.)*

(iii) The changes described above contributed toa significant increase in the Marginal Rate ofProfit (AR). The increase (since 1985, Figure8) of the Marginal Rate of Profit (AR)reflects a rise in the profitability of newinvestment. Indeed, the Net Fixed CapitalFormation (I) has started to increase since1986 (for the first time after 1979, Figure 9),while the net imports of entrepreneurialcapital in the Greek economy, which weredramatically decreasing since 1980, attained anannual increase rate of 30.2% in 1987, 52.3%in 1988, 6.7% in 1989 and 41 % in 1990, thusreaching the 1979 level in 1988 (calculated inU.S. dollars and at constant 1980 prices).

(iv) The marginal output/capital ratio (AY/I) inGreek manufacturing has shown a trend ofstabilization since 1985, contrary to thecorresponding average output/capital ratio(Y/K) (see Figure 5). It is clear then, that ifthe marginal ratio attains an increasingtendency for some time and continues to attainhigher values than Y/K, this may result in anincreasing trend also of the averageoutput/capital ratio (Y/K). This is, as arguedabove, the main factor affecting the profitrate. However, this development has not yetbeen apparent.

In the social and economic conjuncture determinedby the above described parameters, the Greek labormovement has become the major — if not the only —force of opposition in the strategy of the leadingcapitalist forces and the government's economicpolicy which arises from it. The political partiesof the Left can hardly follow the spontaneousinitiatives of the working people (strikes,demonstrations, but also alternative economicpolicy propositions stated by trade-unionleaders). On the one hand, the Socialist Party(PASOK) gives some "rear-guard fights" bycriticizing the "unsocial" character of thegovernment's monetarism. On the other hand, thecommunist Left, having supported a "mandatorygovernment" of the Right in the Summer of 1989{which was supposed to investigate the "economicscandals" of the previous PASOK government andwhich practically opened up the way for theelectoral victory of the Right in April 1990), wassplit up into two groups in 1991 and is rapidlyloosing its political influence on the workingclass, which benefits the Socialist Party.

A CONCLUDING REMARK

In our opinion, the Greek capitalism crisis hasthe character of capital over-accumulation. Thishypothesis is supported by our theoretical

presentation of the Marxian capital over-accumulation concept as well as the empiricalanalysis of the economic crisis in Greece. The twofactors which determine the character of capitalover-accumulation are the decreasing ability ofthe capitalist class to economize on constantcapital and the

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decreasing exploitation rate of the labor forcefrom 1975 until 1985. The second factor has beenreversed since 1986 by means of a restrictiveeconomic policy. However, the increasingexploitation rate since then cannot compensate forthe effect of the decreasing economy in the use ofconstant capital (regarding the profit rate) whichis proved to constitute the main parameterdetermining economic crisis. Furthermore, ouranalysis has shown that this decreasing economy inconstant capital usage is not the result of any"technical inadequacies" of the "productionsystem," as the bourgeoisie economists claim. Itis the outcome of the social relation of forcesestablished in the class-struggle.

NOTES1. An analytical description of the indices used can also be foundin: a) Schoeller Wolfgang, Weltmarkt und Reproduktion desKapitals, EVA, Frankfurt/M 1976, pp. 102-107. b) Busch Klaus, DieKrise der Europaeischen Gemeinschaft, EVA, Frankfurt/M. 1978, pp.87-214. c) Milios Jean, Kapitalistische Entwicklung,Nationalstaat und Imperialismus. Der Fall Griechenland, KritikiVerlag, Athens 1988, pp. 221-243. d) Barou & Keizer Les grandeseconomies, Seuil, Paris 1984. In our calculations of the LaborShare, only the primary distribution of the Value Added is takeninto consideration. The secondary distribution (through taxes,benefits from state education, health etc.) does not reflectstrictly accumulation conditions, but is highly affected by thegeneral relations of power at the state level, as well as byhistorical conditions and forms, inherent in each particular socialformation. In order to describe, therefore, the influence uponprofitability of changes in the production process, we preferredto use the profit rate corresponding to primary distribution (thatis, wages and salaries plus compensation of self-employed personsand social insurance paid by employers).

REFERENCESAltvater, E., J. Hoffmann, W. Schoeller and W. Semmler. 1974. Entwicklungsphasen und-tendenzen des Kapitalismus in Westdeutschland. Part A in PROKLA No 13, Berlin, Part Bin PROKLA No 16, Berlin,

Altvater, E., J. Hoffmann and W. Semmler. 1976. Zum Problem der Profitratenberechnung.

in PROKLA No 24, Berlin.Barou, Y. and B. Keizer. 1984. Les grandes economies. Seuil, Paris. Billaudot, B. and A. Gauron. 1985. Croissance el crise. La Decouverte, Paris. Busch, Kl. 1978. Die Krise der Europaeischen Gemeinschaft, EVA Frankfurt, M. Diefenbach, Ch. G. Groezinger, D. Ibsen, F. Wartenpfuhl and U. Wengenroth. 1976. Wiereal ist die Realanalyse? in PROKLA No 24, Berlin.

Dumenil, Gerard. 1978. Le concept de loi economique dans le Capital, Maspero, Paris.Epilogi (Monthly Economical Review in Greek language). The Greek Economy in Figures-1990. 1991. (Statistical guide in Greek and English), Electra Press, Athens,.loakimoglou, E. 1989. Profitability Crisis in Greek Manufacturing, (in Greek). Proc. of the

Second Congress on Greek Industry, organized by the Technical Chamber of Greece, May. loakimoglou, E. and J. Milios 1986. Crisis and Austerity, (in Greek), Review Thesis. No. 14,

January-March 1986, pp. 7-24, Athens.loakimoglou, E. and J. Milios. 1988. Automation of Production and Labour Force

Reproduction. Proceedings of Samos Conference on Changing LabourProcesses and NewForms of Urbanization, Thessaloniki.

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Loiseau, B., J. Mazier and MB Winter. 1977. Rentabilite du capital dans les economiesdominantes. Economic et statistiques No 86.

Marx, Karl. 1981. Capital, Volume 3, Penguin books in association with New Left Review,

London. Milios, J. 1988. Kapitalistische Entwicklung, Nationalstaat und

Imperialismus. Der FallGriechenland. Athens: Kritiki Verlag.

Milios, J. 1989. The Problem of Capitalist Development: Theoretical Considerations in View

of the Industrial Countries and the New Industrial Countries. In,Gottdiener, Komninos(Editors): Capitalist Development and Crisis Theory. Accumulation, Regulationand SpatialRestructuring, pp 154-173, London-New York: Macmillan Press.

Milios, J. and E. loakimoglou. 1990. Internationalization of Greek capitalism and the balance

of payments, (in Greek). Exandas, Athens. Schoeller, W. 1976. Weltmarkt und Reproduktion des Kapitals, EVA,

Frankfurt, M. p.102-107.

APPENDIX

Capital «nil Over-accumulation CrUi·: ...

103

104 Blto loakimoglou «n<i JohnMilioi

and Over accumulation Criiir. ...

103

106 rim-, loakimoglnti »n<i i-.i... Milioi

( ,.,.,(,i A. . ..i....i.iii'-ii HIM! < »v«-i in i iniiiilaiM.il Criib:,,. 107