Preobrazhensky's multiplier

[Rakesh Bhandari <rakeshb@xxxxxxxxxxxx>]

Preobrazhensky wrote before Keynes:

"Increased opportunities to sell abroad must have the effect of
promoting absorption of unrealized balances...The sale of even a part
of these balances...has enormous significance for the entire system.
That is true not because of the absolute weight of the foreign
market, which is
generally insignificant...but because sales in the foreign market
will make it possible, at a given moment, to halt the contraction of
the production apparatus of both departments a higher level than
would be the case if this reserve of capitalist capacity was not
brought into play. Contrary to Rosa Luxemburg's thinking, the
external market is not important in and of itself, but only because
it permits avoidance of far greater contraction of that market which
capitalism acquires internally. This internal market is
incomparably more significant for capitalism."

Moreover, as Richard B Day has put it in the introduction . the
Decline of Capitalism (ME Sharpe, 1985): "in the absence of foreign
sales the typical capitalist crisis was accompanied by widespread
destruction of existing fixed capital. Capitalism would destroy its
own internal market,
spontaneously created during the stage of economic expansion. With
access to relatively minor foreign markets, on the other hand,
unplanned overproduction could be disposed of, making it easier to '
rise to the next
level of expanded reproduction and thereby to expand the basic
market, which  exists within capitalism itself.' In effect
Preobrazhensky discovered what Keynesians would later refer to as the
'foreign trade multiplier,' or the notion that a small increase in
exports might generate
a multiple expansion of domestic sales or forestall a multiple contraction."

Rakesh