Here is what Grossman says about state involvement in the form of war in the private economy. Importantly this passage which seems to be confused (and is confusing) is taken from the chapter on countertendencies to falling profitability.
"The devaluation of accumulated capital takes various forms. Initially Marx deals with the case of periodic devaluation due to technological changes. In this case the value of the existing capital is diminished while the mass of production remains the same. The same effect however, is produced when the apparatus of reproduction is used up or destroyed in terms of value as well as use value through wars, revolutions, habitual use without simultaneous reproduction, etc. For a given economy the effect of capital devaluation is the same as if the accumulation of capital were to find itself at a lower stage of development. In this sense it creates a greater scope for the accumulation of capital. The specific function of wars in the capitalist mechanism is only explicable in these terms. Far from being an obstacle to the development of capitalism or a factor which accelerates the breakdown, as Kautsky and other Marxists have supposed, the destructions and devaluations of war are a means of warding off the imminent collapse, of creating a breathing space for the accumulation of capital. For example it cost Britain £23.5 million to suppress the Indian uprising of 1857—8 and another £77.5 million to fight the Crimean War. These capital losses relieved the overtense situation of British capitalism and opened up new room for her expansion. This is even more true of the capital losses and devaluations to follow in the aftermath of the 1914—18 war. According to W Woytinsky, ‘around 35 per cent of the wealth of mankind was destroyed and squandered in the four years’ (1925, pp. 197—8). Because the population of the major European countries simultaneously expanded, despite war losses, a larger valorisation base confronted a reduced capital, and this created new scope for accumulation. Kautsky was completely wrong to have supposed that the catastrophe of the world war would inevitably lead to the breakdown of capitalism and then, when no such thing happened, to have gone on to deny the inevitability of the breakdown as such. From the Marxist theory of accumulation it follows that war and the destruction of capital values bound up with it weaken the breakdown and necessarily provide a new impetus to the accumulation of capital. Luxemburg’s conception is equally wrong: ‘From the purely economic point of view, militarism is a pre-eminent means for the realisation of surplus-value; it is in itself a sphere of accumulation’ (1968, p. 454). This is how things may appear from the standpoint of individual capital as military supplies have always been the occasion for rapid enrichment. But from the standpoint of the total capital, militarism is a sphere of unproductive consumption. Instead of being saved, values are pulverised. Far from being a sphere of accumulation, militarism slows down accumulation. By means of indirect taxation a major share of the income of the working class which might have gone into the hands of the capitalists as surplus value is seized by the state and spent mainly for unproductive purposes." So state involvement in the form of war which itself a form of spending on unproductive purposes weakens the breakdown and necessarily provides a new impetus to the accumulation of capital.
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