Chapter 2 : 
Marx’s Crisis Theory
--------------------------------------------------------------------

People :
----------------------------------

Author : Paul Mattick

Text :
----------------------------------


The stagnation of bourgeois economics with respect to its
content was for Marx a foregone conclusion. “Classical political
economy,” he wrote,

belongs to a period in which the class struggle was as yet
undeveloped. Its last great representative, Ricardo, ultimately (and
consciously) made the antagonism of class interests, of wages and profits, of
profits and rent, the starting-point of his investigations, naively taking this
antagonism for a social law of nature, but with this contradiction the
bourgeois science of economics had reached the limits beyond which it could not
pass....

In France and England the bourgeoisie had conquered political
power. From this time on, the class struggle took on more and more explicit and
threatening forms, both in practice and in theory. It sounded the knell of
scientific bourgeois economics. It was thenceforth no longer a question whether
this or that theorem was true, but whether it was useful to capital or harmful
expedient or inexpedient in accordance with police regulations or contrary to
them. In place of disinterested inquirers there stepped hired prizefighters, in
place of genuine scientific research, the bad conscience and evil intent of
apologetics.

Marx’s critique of political economy is based on his theory of value
and surplus value. It differs methodologically from classical economics due to
Marx’s understanding of the social dialectic, which includes in its
positive understanding of what exists a simultaneous recognition of its
negation, its inevitable destruction; regards every historically developed form
as being in a fluid state, in motion, and therefore grasps its transient aspect
as well; and because it does not let itself be impressed by anything, being in
its essence critical and revolutionary. Of course, as Marx prefaced these
observations,

The method of presentation must differ in form from that of
inquiry. The latter has to appropriate the material in detail, to analyze its
different forms of development and to track down their inner connection. Only
after this work has been done can the real movement be appropriately presented.
If this is done successfully, if the life of the subject matter is now
reflected back in the ideas, then it may appear as if we have before us an a
priori construction.

His works show that in the course of time Marx increasingly freed himself
from the philosophical interpretation of social development with which he had
begun. It is therefore inappropriate to regard the formal dialectical method as
fundamental for the understanding of capitalist reality and to maintain with
Lenin that a real understanding of Marx’s Capital presupposes
comprehension of Hegel’s Logic. While for Hegel philosophy was the
age grasped by thought, for Marx the dialectic was the expression of the actual
development of capitalism, which yielded in bourgeois philosophy only a false
ideological precipitate. According to Marx it was not that Hegel’s
philosophy led to a correct perception of the capitalist world but that an
understanding of capitalism would make it possible to grasp the “rational
kernel” of the Hegelian system.

Of course, Hegelian philosophy constituted Marx’s starting point, but
it was soon overshadowed by his knowledge of the concrete capitalist social
relations out of which the idealist dialectic had arisen. “What appeared
to be only an object of philosophy became the object of political economy; what
in the conceptual analysis appeared to be only a phantom had to be shown to be
a real phenomenon of the external world.” Independent of the Hegelian
logic in principle if not in fact, Marx’s economic and historical
investigations revealed the dialectical nature of capitalist development. Thus
the dialectic is to be found in Capital just because it is the law of motion of
capitalist society, which alone justifies the dialectical method as a means to
discovery of the truth.

Thanks to the inherent dynamic of the capitalist relations of production,
namely the unity of the opposites capital and labor, the relatively static
process of production and development characteristic of European feudalism gave
way to a process of social development of previously unknown rapidity and
impetuosity, a process with world-wide effects. This engendered the theories of
political economy, the bourgeois revolution, and its reflection in philosophy.
Every revolutionary development of society is based on the creation of new
productive forces, which require corresponding relations of production for
their full unfolding and utilization. Inversely, the creation of new production
relations generates new productive forces, which of themselves operate on the
existing production relations. Whatever stands in the way of these productive
forces and remains bound to the old relations of production leads through
conflicts between social classes to the political struggles that transform one
social order into another. The process of development is thus at the same time
a process of revolution that comprises more or less all aspects of human social
existence.

The capitalist mode of production arose with the development of commodity
production under the conditions of private property and presupposed the
historical separation of the producers from the means of production. Labor
power became a commodity and formed the basis of the conditions of the market
economy. Capitalist production is social production only in the sense that
commodities are produced not for personal use but for sale to other consumers.
This type of social production must at the same time satisfy the profit
requirement of the private owners of capital. The social division of labor is
thus equally a class division. Social production serves society only insofar as
it can serve the capitalists; it is social production subordinated to private
interests. It can therefore be social production not directly but only
indirectly, and this only when the needs of capital accidentally coincide with
social needs.

The social character that capitalist production may in this sense be said to
have appears in the relation between buyers and sellers on the market. The
production carried out by individual firms must conform to social needs as they
are defined by capitalism. In Bourgeois economics the market mechanism appears
as the regulator of the relationship that must obtain between production and
consumption and of the proportional distribution of social labor that underlies
it. In this conception the dual character of production as the production of
commodities and of profits is ignored, as the second of these is accomplished
by means of commodity production and so is already covered by its laws.
Although as a result of the commodity character of labor power this is actually
the case, it in no way alters the circumstance that the production of
commodities presupposes the making of profits and that it is this, in the first
place, that determines the market and price relations. The symmetry of supply
and demand found in bourgeois economics thus excludes insight into the true
market relations and into the dynamic of capital they make possible and that
arises from the drive for profit.

The limits of bourgeois economics are the starting point of the Marxian
critique. For Marx economic relationships are the form assumed by class
relationships under the conditions of capitalist production. Value and price
are equally fetishistic categories for the real class relations that lie
beneath them. While the classical theory of value speaks of exchange value and
use value, Marx asks why the concept of value exists at all. His answer is that
under the conditions of capitalist property relations, the social labor process
is necessarily represented in terms of value relations. Since in such a system
the class relations of exploitation have the form of exchange relations (since
capitalists buy labor power from workers), the division of social production
into labor and surplus labor must take on the character of value relations and
appear as value and surplus value. Were society not a class society resting on
exchange, there would be no exchange between the owners of the conditions of
production and the propertyless workers, and the social production relations
would not be value relations.

The difficulties which the classical economists had with the theory of value
were due to the fact that although they considered commodities as combining
exchange value and use value, they did not discover this double character in
the commodity labor power. This discovery was reserved for Marx, who was thus
the first to account for exchange relations as they actually exist without
abandoning the law of value. The exchange of commodities on the basis of
labor-time equivalence can yield no profit. The double character of the
commodity labor power creates the possibility of profit. While according to the
law of value the purchaser of labor power pays its exchange value, he acquires
at the same time its use value, which is able to produce a value greater than
its true exchange value. This is as much as to say that the price relations of
the market can be understood only with reference to the value relations on
which, as relations of production, they are based. The essence of the
value-governed system is not the exchange of labor-time equivalents but the
capitalist appropriation of unpaid surplus labor. The owners of capital do not
exchange labor-time equivalents among themselves. The law of value governs the
capitalist economy only in the sense that the forces of social production that
exist at any moment set definite limits to the production of surplus value and
that the distribution of the surplus value among capitals must be more or less
adapted to social requirements if the existence and development of capital is
to be secured. Because of this the exchange relations must appear not as value
relations determined by labor time but as price relations deviating from them
without this negating the regulation of capitalist production by the law of
value.

The deviation of price from value excluded the consistent utilization of the
labor theory of value by classical economics which was principally concerned
with distribution. If the law of value is to be maintained, it must be shown
that the actual price relations although different from value relations are
nonetheless determined by the latter. While this determination of price by
value cannot be read off from the prices given in the market, it can be seen in
the changing prices of production, which are formed from cost prices and the
average rate of profit. In the capitalist’s consciousness, as also in the
reality of the market, only the prices of commodities exist. For the individual
entrepreneur even production presents itself as a problem of buying and
selling. He purchases means of production, raw materials, and labor power in
order to produce commodities whose price on the market brings him a profit from
which he can live and which preserves his invested capital and increases it.
Not value and surplus value but only the costs of production and the gains
obtained, expressed in prices, are meaningful for him. But this indifference to
value relations, shared by all capitalists, in no way alters the fact that
production costs, like profits, are only other expressions for definite
quantities of labor time contained in commodities.

The total labor time expended by society yields a total social product that
is divided between wages and profits. The higher the share of the total social
product that falls to the capitalists, the less can fall to the workers, and
vice versa. In reality neither total social production nor total labor power
nor total capital is a directly observable magnitude whose interrelations could
be ascertained. Capital is divided into many different capitals, which confront
not the working class as a whole but smaller or larger groups of workers. As
the capitals themselves differ, so do their abilities to yield surplus value.
The “organic compositions”-the ratios of means of production (or
constant capital) to labor power employed (or variable capital)- of individual
capitals differ depending on the industries in which they are employed.
According to the labor theory of value, only the living labor utilized produces
surplus value. But as profit is surplus value measured against the total
capital (i.e., against the sum of constant and variable capital), profits
should be lower in industries with more constant than variable capital than in
industries where these proportions are reversed. This, however, is not in
general the case, exactly because the competition among capitalists and that of
the buyers with them and with each other leads to a transformation of the true
profits into socially average profits which, added to the costs of production,
allow each capital to participate equally, in accordance with its size, in the
total social surplus value.

If the formation of an average profit rate is explained by competition, the
fact of competition does not explain the magnitude of this rate at any time.
This magnitude depends on the unknown but nonetheless definitely given mass of
profit yielded by the total social capital. And since the total value of the
commodities conditions the total surplus value, while the latter governs the
level of the average profit and thus the general rate of profit, the law of
value regulates production prices.

Although the creation of surplus value by surplus labor takes place in
production, the realization of profits is accomplished in the market. Though
production is dominated by the accumulation of capital and realized on the
market, it is its use-value side that determines the relation between supply
and demand, with its influence on price relations and consequently on the
division of the total surplus value among the various capitals. With the
increase in demand for a particular commodity its production increases, as the
decreasing demand for another diminishes its production. Thus capital moves
from relatively stagnating into rapidly developing industries. The changes in
the organic compositions of individual capitals resulting from this process do
not affect their profitability. On the contrary, they lead to higher profits
than those which fall to less productive capitals. The extra profit, in excess
of the average profit, won at a given price level disappears again, however,
with the influx of capital from profit-poor into profit-rich industries. The
perpetual hunt for extra profit characterizes capitalist competition and leads
by means of it to a higher organic composition of the social capital as a
whole.

To understand changes in value relations and thus in prices, we must start
from the process of accumulation. The modification of the general price level
stems from capitalist accumulation as manifested in the rising productivity of
labor. The general fall in commodity prices can be seen from the comparison of
earlier with later production periods. Every individual commodity comes to
contain less labor time than before. The decrease in value of the individual
commodity is counterbalanced by the increase in the quantity of commodities, so
that the profitability of capital is maintained despite falling prices. Thus
the development of prices depends on the changing productivity of labor and so
on the law of value. For the analysis of capitalist expansion, therefore, no
particular price theory is needed, since the development of prices is already
covered by the value analysis.

In the price relations effected by competition, the value designations of
the individual commodities and individual firms’ profits are lost from
sight, as is also the division of the social product into wages and profits.
But whatever the terms of this division, it operates at any given time on
quantities of commodities requiring definite amounts of labor time, in turn
divided first of all into time spent on value production and on surplus-value
production. The actual distribution, expressed in price terms, presupposes this
first division. Hidden by the market, this basis has just as much reality as
the observable world of prices and commodities. In view of the latter the value
relations appear to be simplifying abstractions from the complicated phenomena
of the market; while if we focus on the fundamental relations of production,
the world of commodities represents only a multifaceted modification of those
relations. The relations of production can be understood without reference to
the market, while the market cannot be understood without reference to them. It
is therefore the production relations that must form the basis for any
scientific analysis of capital and alone can make the possibilities and limits
of market processes comprehensible.

The theory of value based on labor time is, then, abstract relative to the
market and concrete relative to the relations of production. It is a mental
construction only in the sense that value categories do not relate directly to
market phenomena, so that the value relations hidden behind prices can be
grasped only by way of thought. The pure market theory of bourgeois economics
is naturally also an abstract affair, since it excludes the capitalist
relations of production from consideration. In this way it shuts itself off
from insight into the totality of the actual state of affairs and hence also
from an understanding of market phenomena themselves. Value analysis, in
contrast, makes possible the explanatory passage from abstract to concrete,
since it can demonstrate the subordination of market relations to the
production relations of modern society and so first bring to light the process
of the capitalist economy as a whole.

The dual character of production as the production at once of commodities
and of profits excludes the adaptation of production to real social needs or an
equilibrium of supply and demand in the sense of an equilibrium of production
and consumption. According to Marx, demand is essentially subject to the mutual
relationship of the different classes and their respective economic positions,
notably therefore to, first, the ratio of total surplus value to wages, and,
second, to the relation of the various parts into which surplus value is split
up (profit, interest, ground rent, taxes, etc.). And this thus again shows how
absolutely nothing can be explained by the relation of supply and demand before
ascertaining the basis on which this relation rests.

However, due to the effort, growing out of capitalist competition, to
heighten exploitation, this basis (the relations of production) is in a state
of perpetual transformation, which manifests itself in changing relative prices
of goods on the market. Therefore the market is continuously in disequilibrium,
although with different degrees of severity, thus giving rise, by its
occasional approach to an equilibrium state, to the illusion of a tendency
toward equilibrium. The capitalist laws of motion exclude any sort of
equilibrium, even when profit production and commodity production develop in
tandem, since this very development stimulates the unfolding of a contradiction
inherent in it that only further development can overcome.

Market and production, it goes without saying, form a unity and can be
separated only in thought. However, market relations are governed by the
production relations. The price of labor power can in general not fall below
its value, i.e., the cost of reproduction of the labor force. It can never rise
to the point at which it would abolish capitalist surplus value and so threaten
the existence of the system. Whatever may happen in the market its effects are
determined by the relations of production and the apparently autonomous
operation of the market is restricted to the paths prescribed by these
relations. However much the actual price relations may deviate from the value
relations on which they are based the total sum of commodity values can be no
greater than the quantity of labor time expended in the production of the
commodities. The sum of commodity prices can indeed lie below the total value,
since total value and total price are equivalent only under the assumption that
all the commodities produced are sold. There may, that is, be more value and
surplus value created than finds expression in commodity prices, as happens
when a part of production cannot be sold and therefore loses its value
character. In any case the total prices realized are equal to the total value
realized. In this way an analysis of capital’s laws of motion based
exclusively on value relations finds its justification.

While the phenomena investigated in Volume 1 of Marx’s Capital
are those “which constitute the process of capitalist production as
such,” in the third volume he attempts to “locate and describe the
concrete forms that grow out of the movements of capital considered as a
whole.” The configurations of capital, as Marx describes them,
“thus approach step by step the form which they assume on the surface of
society, in the action of different capitals upon one another, in competition,
and in the ordinary consciousness of the agents of production
themselves.” But this step-by-step procedure does not negate the insights
into the laws of capitalist development attained by analysis of the process of
production as such. These insights remain valid for capital “considered
as a whole,” although they undergo various metamorphoses in the course of
its investigation. The abstractions of Volume 1 represent not a mere
methodology used to approach the inscrutable world of commodities but a
representation of the actual foundation on which this world is based. Only if
this foundation itself is exposed to view can the dynamic of the system, from
which alone the multiple configurations of capital arise, be portrayed.

If the value of labor power is given by the cost of reproducing it, the
labor time in excess of this amount has the form of surplus value. The
increasing productivity of labor augments its use value relative to its
exchange value and in this way enlarges the mass of capital derived from the
surplus value. Capital formation can thus be shown to be the development of the
productivity of labor. The increasing mass of capital determines the quantity
of surplus value necessary for its further utilization or valorization (capital
expansion by the investment of surplus value as additional capital). However,
this process at the same time reduces the labor power employed relative to a
given capital and accordingly diminishes the relative quantity of surplus
value. With more rapid accumulation the employed labor power of course
increases in absolute terms and declines only in comparison with the growing
capital. But even this relative decline, in the context of the growing
capital’s increasing valorization needs, must in the course of time lead
to a declining rate of accumulation. From this it follows that the accumulation
of capital is constrained by definite value relations. If there is sufficient
surplus value to valorize the capital already in existence, it secures its
future development. If the surplus value is insufficient, then further rapid
development of capital comes to an end.

The capitalist production of commodities is in reality the production of
capital; the production of goods for use, that is, is only a means to the
expansion of capital, and this has no subjective limits. A capital, as a sum of
money invested in production, must emerge again from circulation as an enlarged
capital if the conditions of capitalist production are to be met. Production is
thus exclusively the production of surplus value and is governed by the latter.
Since surplus value is unpaid labor time, the production of capital depends on
the quantity of labor time appropriated. It is therefore of the essence of
capital to increase the quantity of unpaid labor time. At a given stage of
development and with a given number of workers, surplus value can be enlarged
only by lengthening the time during which workers labor for the capitalists and
shortening that during which they produce for themselves. Both methods face
impassable objective barriers, since the working day cannot exceed twenty-four
hours, and the worker’s wage cannot be reduced to zero. The accumulation
of capital possible under such conditions, as the accumulation of means of
production, requires additional labor power and engenders a corresponding
increase of the mass of surplus value. For accumulation to advance
continuously, however, the productivity of labor must increase. This is
accomplished by means of the development of technology and organization of the
workplace. While these depend on accumulation, both of them promote an
acceleration of accumulation, leading to an alteration of the value relations
that constitute the organic composition of capital.

Under the assumption of a continuous accumulation of capital an assumption
in complete accord with reality the increasing productivity of labor is
reflected in a shift of the organic composition of capital toward its constant
component. The variable capital grows, of course, but this growth lags behind
that of the capital embodied in means of production. Despite the declining
number of workers relative to the means of production confronting them as
capital, the surplus value increases so long as the increasing productivity of
labor adequately reduces the portion of the social labor time necessary to
reproduce the workers. Thus despite the changing organic composition of
capital, the valorization of capital and its further accumulation can take
place.

While the rate of surplus value increases with the changing organic
composition of capital, the latter exerts a contradictory effect on the rate of
profit, since the first is the ratio of surplus value to the variable capital,
while the rate of profit compares surplus value to both parts of capital,
constant as well as variable. With the more rapid growth of the constant
relative to the variable capital, a given rate of surplus value must mean a
declining profit rate. The rate of profit can remain unchanged despite a higher
organic composition of capital only if the rate of surplus value rises rapidly.
With a quick enough increase of the rate of surplus value, the rate of profit
can even rise. As the rate of surplus value can increase essentially only
together with the rise in the organic composition of capital that accompanies
accumulation, the accumulation process turns out to be governed by the general
rate of profit, the movement of which determines all other movements of
capital.

On the assumption of an irresistibly continuous accumulation of capital, the
mutually compensating but contradictory movements of the rate of surplus value
and the rate of profit must eventually create a situation excluding further
accumulation. While the rate of surplus value must be increased enormously if
the fall in the rate of profit is to be halted, the variable capital still
continues to decline relative to the constant, and the number of producers of
surplus-value declines in comparison with the quantity of valorized capital.
Ever fewer workers must create ever greater surplus value in order to produce
the profits required by the capital already in existence if it is to continue
to expand. Inevitably a point will be reached at which the greatest quantity of
surplus value that can possibly be extorted from the diminished working class
is no longer sufficient to augment the value of the accumulated capital.

This line of reasoning represents, to begin with, only the logical
consequence of a hypothetical course of development. It refers to no more than
the production and accumulation of capital in an imaginary system in which
total capital confronts the working class as a whole thus it refers to the pure
operation of the mechanism of surplus-value production and the dynamic of the
accumulation process. Marx’s aim is to demonstrate the existence of a
tendency, inherent in capitalist development and dominating it, by reference to
which alone the real movement of capital can be explained. By this means he
demonstrates that all the difficulties of capital arise from the nature of
capital itself from surplus-value production and the development, governed by
it, of the social productivity of labor on the basis of the capitalist mode of
production.

Just as the law of value cannot be observed directly in the actual events of
the market but acts through market processes to accomplish the necessities of
capitalist production, so the tendency of the rate of profit to fall (and thus
the effect of the law of value on the accumulation process) is not a process
observable directly in reality but a drive to accumulate manifested in market
phenomena, whose results bring the capitalist mode of production into always
greater conflict with real social needs. “The real barrier of
capitalist production,” wrote Marx,

is capital itself. It is that capital and its
self-expansion appear as the starting and the closing point, the motive and the
purpose of production; that production is only production for capital
and not vice versa, the means of production are not mere means for a constant
expansion of the living process of the society of producers. The limits
within which the preservation and self-expansion of value of capital resting on
the expropriation and pauperization of the great mass of producers can alone
move – these limits come continually into conflict with the methods of
production employed by capital for its purposes, which drive toward unlimited
extension of production, toward production as an end in itself, toward
unconditional development of the social productivity of labor. The means -
unconditional development of the productive forces of society – comes
continually into conflict with the limited purpose, the self-expansion of the
existing capital. The capitalist mode of production is, for this reason, a
historical means of developing the material forces of production and creating
an appropriate world market and is, at the same time, a continual conflict
between this its historical task and its own corresponding relations of social
production.

This analysis of capitalist accumulation exclusively in terms of the
production process, which reveals the tendency of the rate of profit to fall,
suggests the historical limits of this mode of production, without thereby
being able to determine the exact time of its final denouement. But as this
tendency characterizes the system from its beginning and is responsible for its
dynamic, it must at all times appear in the actual events of the market, albeit
in modified forms. It will be visible not as such but in the form of the
measures taken to counter it, the processes Marx calls “counteracting
influences which cross and annul the effect of the general law” of the
falling rate of profit. All of these countertendencies – the increasing
intensity of the exploitation of labor, the depression of wages below the value
of labor power, the cheapening of the elements of constant capital, relative
overpopulation, foreign trade, and the increase in stock capital – are
real phenomena whose function it is to improve the profitability of capital,
i.e., to counteract the tendency of the rate of profit to fall. So long as they
are successful and make possible the valorization of capital, the tendency of
the rate of profit to fall is not observable as such and is de facto without
force, although it is the cause of capital’s activities to counteract it.
Only in the actual crises which break out from time to time does the fall of
the profit rate show itself in its own form, since the counteracting processes
are then not sufficient to secure the further valorization of capital.

Marx’s theory of accumulation is thus at the same time a theory of
crisis, as it locates the origin of crisis in an insufficient valorization of
capital, which in turn originates in the breakthrough of the tendency of the
profit rate to fall. This kind of crisis arises directly from capital
accumulation, governed by the law of value, and can be overcome only through
renewed value expansion, i.e., through the reestablishment of a rate of profit
adequate for further accumulation. Its basis is an insufficiency of the surplus
value available in relation to the capital already accumulated; this transforms
the latent fall of the profit rate into an actual profit shortage. The
cessation of further accumulation constitutes the crisis situation, which Marx
characterized as one of overaccumulation:

Over-production of capital is never anything more than
overproduction of means of production -- of means of labor and necessities of
life -- which may serve as capital, i.e., may serve to exploit labor
at a given degree of exploitation; a fall in the intensity of exploitation
below a certain point, however, calls forth disturbances, and stoppages in the
capitalist production process, crises, and destruction of capital. It is no
contradiction that this over-production of capital is accompanied by more or
less considerable relative over-population. The circumstances which increased
the productiveness of labor, augmented the mass of produced commodities,
expanded markets, accelerated accumulation of capital both in terms of its mass
and its value, and lowered the rate of profit -- these same circumstances have
also created, and continuously create, a relative overpopulation, an
over-population of laborers not employed by the surplus-capital owing to the
low degree of exploitation at which alone they could be employed, or at least
owing to the low rate of profit which they would yield at the given degree of
exploitation.

In order to illustrate the concept of overaccumulation, Marx had recourse to
a further, not particularly well-chosen example:

To appreciate what this overaccumulation is, one need only
assume it to be absolute.... There would be absolute overproduction of capital
as soon as additional capital for purposes of capitalist production equals
zero. ... As soon as capital would, therefore, have grown in such a ratio to
the laboring population that neither the absolute working time supplied by this
population, nor the relative surplus working time, could be extended any
further (this last would not be feasible at any rate in the case where the
demand for labor were so strong that there were a tendency for wages to rise);
at a point, therefore, when the increased capital produced just as much, or
even less, surplus value than it did before its increase, there would be
absolute overproduction of capital. ... [T]here would be a steep and sudden
fall in the general rate of profit, but this time due to a change in the
composition of capital not caused by the development of the productive forces,
but rather by a rise in the money value of the variable capital (because of
increased wages) and the corresponding reduction in the proportion of surplus
labor to necessary labor.

As this example has given rise to many misunderstandings, it is necessary to
deal with it briefly. On its basis, for example, Martin Trottmann reproaches
Henryk Grossmann, who explained over-accumulation in terms of insufficient
value expansion of capital, for falsely identifying two different, completely
contrary tendencies of capitalist accumulation as one and the same.
Marx’s concept of absolute overaccumulation, according to
Trottmann, signifies overproduction not as a consequence of insufficient
valorization but as the consequence of a shortage of labor power leading to
rising wages and declining surplus value. What Trottmann fails to see is that
the end result is the same in both cases, namely the suspension of accumulation
as a result of a lack of profits. It was this state of affairs that Marx wanted
to emphasize, although his example is doubly unfortunate, as it contradicts not
only all experience but also his own theory of accumulation itself.

On the basis of the theory of surplus value, the limit of the capitalist
mode of production is to be seen in the fact that “the development of the
productivity of labor creates in the fall of the rate of profit a law which at
a certain point comes into antagonistic conflict with this development and must
be overcome constantly through crisis.” However, there is more to the
regularity of crisis than this. On the one hand, the crisis appears as the
breakdown of the continually evolving accumulation of capital that faces
collapse due to the tendency of the rate of profit to fall inherent in it. On
the other hand, it also appears in numerous additional contradictions, born in
the market, which are of course accentuated by, as well as ultimately based on,
the social contradiction of the relations of production. These partial crises
cannot be understood apart from the general crisis originating in the
capital-labor relation, just as market events in general cannot be understood
except by reference to the relations of production.

In order to understand the crisis tendency so closely bound up with the
system, it is necessary always to bear in mind the dynamic character of the
system, which rules out any sort of equilibrium. Against the equilibrium
theorists of classical economics, who confused the process of circulation with
direct barter and consequently imagined that every sale is a purchase and every
purchase a sale, Marx maintained that “this gives poor comfort to the
possessors of commodities who, unable to make a sale, cannot accordingly make a
purchase either.” In barter one commodity is directly exchanged for
another. But when exchange value is given a form independent of the object by
being embodied in money, the sale of one commodity is an act distinct from the
purchase of another. With this separation of purchase and sale the possibility
of crisis already arises. “The possibility of crisis, which became
apparent in the simple metamorphosis of the commodity, is once more
demonstrated, and further developed, by the disjunction between the (direct)
process of production and the process of circulation.” In this way demand
and supply can fall asunder. Indeed, according to Marx, “in reality
supply and demand never coincide, or, if they do, it is by mere accident, hence
scientifically and to be regarded as not having occurred.”Thus an element
of crisis is to be found in commodity production itself, in the contradiction,
embodied in the commodity, between exchange value and use value. The
contradictions and thus the potentialities of crisis already included in
commodity and money circulation must however be explained on the basis of the
specifically capitalist form of the circulation of commodities and money. Real
crises “can only be deduced from the real movement of capitalist
production, competition, and credit,”namely, in terms of the aspects of
this movement peculiar to capital, not those which would follow from the nature
of commodities and money as they would exist in another social system.

In the direct process of production these elements of crisis do not appear,
although they are contained in it implicitly, since the process of production
is that of the creation and appropriation of surplus value. The possibility of
crisis appears first in the process of realization, in circulation, which is
implicitly and explicitly a process of reproduction, that is, of the
reproduction of the surplus-value-producing relations of production.

The circulation process as a whole or the reproduction
process of capital as a whole is the unity of its production phase and its
circulation phase, so that it comprises both these processes or phases. Therein
lies a further developed possibility or abstract form of crisis. The economists
who deny crises consequently assert only the unity of these two phases. If they
were only separate, without being a unity, then their unity could not be
established by force and there could be no crisis. If they were only a unity
without being separate, then no violent separation would be possible implying a
crisis. Crisis is the forcible establishment of unity between elements that
have become independent and the enforced separation from one another of
elements which are essentially one.

Although it first appears in the process of circulation, the real crisis
cannot be understood as a problem of circulation or of realization, but only as
a disruption of the process of reproduction as a whole, which is constituted by
production and circulation together. And as the process of reproduction depends
on the accumulation of capital, and therefore on the mass of surplus value that
makes accumulation possible, it is within the sphere of production that the
decisive factors (though not the only factors) of the passage from the
possibility of crisis to an actual crisis are to be found. The crisis
characteristic of capital thus originates neither in production nor in
circulation taken separately but in the difficulties that arise from the
tendency of the profit rate to fall inherent in accumulation and governed by
the law of value.

Of course, according to Marx, “the conditions of direct exploitation,
and those of realizing it, are not identical. They diverge not only in place
and time but also logically. The first are only limited by the productive power
of society, the latter by the proportional relation of the various branches of
production and the consuming power of society.” These contradictions
contain the possibility of crisis, which is the breaking up of the unity of
production and circulation, and the necessity of a forceful reestablishment of
this unity. Under the conditions of capital production, however, the
reestablishment of this unitary reproduction process refers not simply to the
overcoming of disproportionality and a strengthening of the capacity to consume
as such but also to the adaptation of both production and circulation to the
needs of capitalist reproduction, in other words, the need of capital for
valorization. It is not that the crisis is a result of a lost proportionality
of production and consumption; rather, the crisis, as a breakdown of the
accumulation process due to other causes, expresses itself in
disproportionality and a weakened capacity to consume.

This disproportionality and weakened consumer capacity are constant features
of capitalism. It is here not a matter of more or less, not that in crisis the
disproportionality is too big and consumption too small, because
disproportionality and insufficient consumer power are both conditions and
results of accumulation in general and are determined by it. Were this not the
case, any crisis could be overcome by increasing consumption capacity and
reducing the degree of disproportionality, even if this could only be done,
within the framework of market relations, by the violent means of the crisis
itself. Up to now however, every real crisis has been overcome without
abolishing the disproportionality of production and without increasing
consumption capacity in relation to production. On the contrary, the
disproportionalities are reproduced as part of the system of capitalist
production, and the social capacity for consumption decreases relative to the
accumulated capital.

Marx’s critique of capitalism and of its economic theories is always a
double one. On the one hand, he steps onto the terrain of these theories in
order to demonstrate their untenability in the light of the theory of value. On
the other, he takes his stance ultimately outside capitalist Society and its
value categories in order to demonstrate its historically limited character.
From this viewpoint production cannot be identified with the production of
producer and consumer goods, since this takes place only within the framework
of the production of capital (self-expanding value), and its
possibilities are determined and limited by this framework. The social capacity
for consumption is not simply people’s capacity to consume but this
capacity as governed and necessarily limited by the requirements of surplus
value production. The capitalist economy is thus not only inadequate by its own
standards and afflicted with crises, but, seen from a standpoint of opposition
to this society, it is a social order antagonistic to the satisfaction of
actual and potential social needs. While in the framework of capitalist
production the overproduction of Capital is a circumstance that generates
crisis, from the standpoint of real social relations there exists no
overproduction; indeed there is a lack of means of production capable of
satisfying the needs and aspirations of mankind. The consuming power of Society
is not only limited by surplus-value production but can only find satisfaction
under other social relations. In this way Marx condemns capitalism not only on
the ground of its own deficiencies but also from the standpoint of another, not
yet existing social order, which alone, by the abolition of value production,
will make possible the adaptation of social production to social needs.

Marx stated his double critique of capital, so to speak, in one breath: a
mode of exposition which has led to misunderstandings and to interpretations of
his theory of accumulation as explaining crises either by the
disproportionality (or anarchy) of capitalist production or in terms of
underconsumption. On the basis of these interpretations, one would expect to
find capitalism in continuous situation of crisis, since surplus-value
production presupposes underconsumption, for “the working people can only
expand their consumption within very narrow limits, whereas the demand for
labor, although it grows absolutely, decreases relatively to the same extent as
capitalism develops.” If it is said that the problem is not general
overproduction but the existence of a disproportion between the different
branches of production, this is no more than to say that under capitalist
production the proportionality of the individual branches of production springs
as a continual process from disproportionality, because the cohesion of the
aggregate production imposes itself as a blind law upon the agents of
production, and not as a law which, being understood and hence controlled by
their common mind, brings the productive process under their joint control. The
proportionality of which Marx speaks here, moreover, has nothing to do with the
relationship between production and consumption but concerns the proportion
between surplus value and accumulation required for the reproduction of capital
and so with the increasing disproportionality of the capital relations, which
become visible in crises.

Of course, Marx also wrote that “the more productivness develops, the
more it finds itself at variance with the narrow basis on which the conditions
of consumption rest,” so that the contradiction is intensified
“between the conditions under which ... surplus value is produced and
those under which it is realized.” Thus “the ultimate reason for
all real crises always remains the poverty and restricted consumption of the
masses as opposed to the drive of capitalist production to develop the
productive forces as though only the absolute consuming power of society
constituted their limit.” However, these remarks provide no foundation
for a theory of crisis based on underconsumption, nor can the realization of
surplus value be made the principal problem of the capitalist mode of
production. It goes without saying not only that the origin of crisis lies in
an insufficiency of surplus-value production but also that crisis must manifest
itself as a problem of the realization of surplus value and the insufficient
buying power of the working population. For the very circumstances that lead to
the fall of the rate of profit and with it to the restriction of the process of
accumulation can be seen also on the market in the form of insufficient demand
and the growing difficulty of turning commodities back into money -- in brief,
in the interruption of the circuit of capital that underlies the entire process
of reproduction.

In the early days of capitalist accumulation, when the organic composition
of capital was low, the contradiction between production and consumption was
less pronounced than it has become at a later stage of development, when the
situation is the reverse. In the earlier period general poverty can be much
greater than it would be at a later stage of accumulation, since with the lower
rate of accumulation constant capital grows more slowly. Thus the realization
of surplus value by way of capital accumulation still involves fewer
difficulties than at later stage of capital expansion. These difficulties
multiply together with the difficulties of accumulation, which stem from the
tendency of the rate of profit to fall and come to a head in a widening
discrepancy between the production and the realization of surplus value between
social production and social consumption.

While it is this discrepancy alone that makes capitalist progress possible,
at the same time it limits this progress since it comes into conflict with the
reproduction requirements set by the law of value for the total capital, that
is, at the moment when the production of surplus value no longer suffices to
continue a given tempo of accumulation. Only through the improvement of
surplus-value production, through the restoration of the rate of profit
necessary for further accumulation, can capital again overcome the breakdown of
the reproduction process. It will not thereby have overcome the discrepancy
between the production and realization of surplus value. On the contrary, the
overcoming of the crisis, by way of the realization of surplus value thanks to
further accumulation, also reproduces the divergence between the production and
realization of surplus value and that between production and consumption in the
sense of the satisfaction of real social needs.

Capital realizes surplus value by means of capitalistically un-productive
consumption and by capitalist accumulation. So long as the latter meets with no
obstacle, there exists no realization problem. There is none just because the
tendency of the rate of profit to fall requires the perpetual increase of
surplus value and thus the growth of the rate of accumulation. Capitalist
production exclusively serves the accumulation of capital. But this mode of
production, ruled by value production, cannot really free itself from the
use-value character of social production, which of course, under capitalist
conditions, means that it is not free from the limitations that the use value
of labor power imposes on it.

Surplus value can never be anything but surplus labor, a portion of total
labor; this in itself sets certain limits to accumulation. Thus despite
capital’s “accumulation for the sake of accumulation,” there
can be for it no unlimited “production for the sake of production.”
The rate of surplus value obtaining at any moment and the labor power
profitably exploitable at that time set the limits of accumulation, which can
be overstepped only through an enlarged production of surplus value. So every
momentary over-production of capital must appear as a crisis that has to put an
end to this overproduction. This can be accomplished only by the restoration
of a lost proportionality between surplus value and the production of capital,
with respect to value relations which are at the same time use-value relations,
even though the latter aspect is not consciously considered. More of the social
labor must fall to capital, less to the workers.

The crisis serves to accomplish this in two different ways: first, by the
destruction of capital, and second, by the increase of surplus value, until
both processes have produced the needed relation between the rate of profit and
the amount of surplus value required for further accumulation. A new cycle of
accumulation begins. Like all the preceding cycles, it too must end in the
overproduction of capital, when the uncontrollable passion for surplus value
again drives accumulation beyond the point at which valorization is possible.
Through the crisis “a large part of the nominal capital of the society,
i.e., of the exchange value of the existing capital, is once and for all
destroyed, although this very destruction, since it does not affect the use
value, may very much expedite the new reproduction.” The lowered exchange
value lowers the organic composition of capital, raising the rate of profit
even with a constant rate of surplus value. But the intensified competition
provoked by the crisis leads capitalists to cut their production costs and so
to take measures in the sphere of production which in themselves raise the rate
of surplus value. Thus the conditions for a resumption of the process of
accumulation are re-created within the crisis, and with them the further
potential for the realization of surplus value by way of capitalist
expansion.

If this potential did not exist, the crisis could not be overcome at all, as
neither the proportionality of the different branches of production nor the
abolition of the divergence between production and consumption are (as we have
seen) possibilities for capitalism. The proportionality of the various branches
of production is determined by accumulation and achieved by the same processes
that lead to the formation of the average rate of profit.

[The] quantitative limit to the quota for social labor time
available for the various particular spheres of production is but a more
developed expression of the law of value in general, although the necessary
labor time assumes a different meaning here. Only first so much of it is
required for the satisfaction of social needs. The limitation occurring here is
due to the use value. Society can use only so much of its total labor time for
this particular kind of production under prevailing conditions of
production.

This adjustment, which is in practical terms an adjustment to market demand,
is naturally accomplished, like the formation of the average rate of profit,
“only in a very complicated and approximate manner, as a never
ascertainable average of ceaseless fluctuations.” It is, however,
accomplished in times of capitalist prosperity no less than in periods of
depression and can therefore not be appealed to for an explanation of crisis.
The divergence of production and consumption, which allegedly gives rise to
crisis, not only persists during the crisis but acquires an even sharper form;
nevertheless the crisis situation leads to a new upswing. So the crisis cycle
cannot be explained by underconsumption.

A theory of the crisis cycle must explain prosperity as well as depression.
But prosperity would be inexplicable if underconsumption and
disproportionalities per se led to crisis, for then the first crisis
would already have been the last. In fact capital has developed through
numerous crises until the present day. This was made practically possible by
the increase in the productivity of labor, which augmented surplus value by
lowering the value of labor power though without negating the improvement of
the proletariat’s living conditions, since a smaller exchange value can
represent a greater quantity of consumer goods. Crisis must thus be understood
not in terms of the observable phenomena of the market, superficial from the
point of view of explanation, but in terms of the laws, directly unobservable
yet fundamental to the capitalist economy, of surplus-value production. Here
too Marx’s dictum holds; “All science would be superfluous if the
outward appearance and the essence of things directly coincided.”

While surplus value is created in production, “the conversion of
surplus value into profit ... is determined as much by the process of
circulation as by the process of production.” It is this fact, which on
the one hand leads to crisis, that on the other hand allows capital to escape
from it. The destruction of capital that takes place in a crisis is a
precondition for the powerful transformation of capital, concentrated in a
short period of time, that is the prerequisite of further accumulation. The
destruction of capital always accompanies capital formation, although in
periods of economic prosperity, in a relatively moderate form. In the crisis
the destruction of capital accelerates and accentuates this tendency, inherent
as it is in the competitive concentration and centralization of capital with
regard to both production and circulation. This process, together with the
improvement of surplus-value production and the devaluation of capital, and
despite a further increase in the organic composition of capital, leads to a
restoration of the necessary rate of profit. The crisis manifests itself
directly in overproduction of commodities and insufficient purchasing power. As
“capital consists of commodities ... overproduction of capital implies
overproduction of commodities.” From this it is not a big step to the
idea that the ultimate cause of crisis is underconsumption. This idea is
strengthened all the more by Marx’s statement that “constant
capital is never produced for its own sake but solely because more of it is
needed in spheres of production whose products go into individual
consumption.” If there is insufficient social purchasing power, however,
the metamorphosis of money into commodities and the retransformation of
commodities into money cannot take place, and this limits the production both
of commodities and of constant capital.

Although this is what really happens, it does not explain how capital
escapes from its dilemma, since in itself the crisis can only worsen this
situation. If, as Marx here appears to maintain, this were really only a
question of underconsumption, then the crisis could not be overcome by
expanding the production of commodities and constant capital beyond that
achieved at the point where prosperity gave way to crisis. But in fact every
new prosperity arising out of crisis leaves the previous prosperity far behind
with respect to the production of commodities and means of production. Had this
not been the case, there would have been no capitalist development, no
continuous accumulation of capital.

Marx’s statement, then, represents either an error of judgment or
unclear writing, especially since the disproportionality of the individual
spheres of production and that between production and consumption are hardly
contested by bourgeois economics. As the economists see it, however, the
equilibrium tendencies of the market lead to the overcoming of these
irregularities, i.e., the ensuing scarcity of commodities and capital restores
the lost proportionality of production and consumption. If “constant
capital is never produced for its own sake but solely because more of it is
needed in spheres of production whose products go into individual
consumption,” then Marx’s crisis theory would not be different from
the bourgeois theories of the business cycle. Like them it would be a theory of
the market in which the relations of supply and demand decide the extension or
contraction of production.

In opposition to this, however, the Marxian theory speaks of accumulation as
the factor exacerbating the contradictions of capitalism to the point of
breakdown. The underconsumption theory as ascribed to Marx, which can indeed be
read in some of his expressions, can be conclusively rejected on the basis of
his double critique of capital. On the one hand, the overproduction of
commodities and insufficient demand are characteristics of the
over-accumulation of capital. On the other hand, from a position opposed to
capitalism, the accumulation of capital is based on a perpetually widening
divergence between production and consumption, so that the ultimate reason for
all real crises remains indeed the poverty and restricted consumption of the
masses even if this is only to say that the crisis belongs to capitalism.

The capitalists experience the crisis as an insufficient demand for
commodities, the workers as insufficient demand for their labor power. The
solution for both lies in the growth of overall demand through the resumption
of capital accumulation. But how can the expanded commodity production that
goes with this find a market when current production has already outstripped
demand? The answer is that capitalism produces precisely not to meet consumer
demand but over and above it, until the limits of surplus-value creation are
reached, limits that cannot be known when the goods are produced but can only
be discovered in the market. Every crisis can be understood only in relation to
the prosperity preceding it, just because prosperity derives not from the
consuming power of society but from the accumulation requirements, imposed by
capitalist competition, of the individual capitals, which at any time are
growing to produce not for an existing but for an expected
market. This is due to general social development and to the elimination of
less competitive capitals, which yields the more competitive a larger market,
along with accumulation.

Production always precedes consumption. In capitalism, however, it advances
blindly, as each capital strives not only to win the greatest share of a given
market but also to enlarge it ceaselessly and so to avoid losing it. The
prerequisite of this is the rapid growth of productivity, which lowers costs,
and with it the accumulation of capital in the form of means of production and
the changing of the organic composition of capital that accompanies this. The
general competition thus leads to a more rapid growth of the constant versus
the variable capital, for the individual capitals as for the society as a
whole. It is this very process that makes possible the realization of surplus
value by way of accumulation, without respect for the restriction of
consumption this presupposes. Surplus value becomes new capital, which in its
turn produces capital. This process, senseless as it is, is actually the
consequence of a mode of production oriented exclusively toward the production
of surplus value. All good things come to an end, however, and this same
process finds its nemesis in the tendency of the rate of profit to fall. At a
certain point the realization of surplus value accumulation is halted, when
accumulation ceases to yield the surplus value necessary for the continuation
of this process. Then it suddenly becomes apparent that without accumulation a
part of the surplus value cannot be realized, since demand is insufficient to
transform the surplus value lying hidden in the commodities into profit.

With respect to accumulation Marx asked why the rate of profit does not fall
more quickly than it does, despite the enormous development of productivity. He
answered his question by pointing to the countertendencies. The point can also
be put by asking not how crises begin but how capital has been able to
accumulate despite all its crises. The crisis is easier to understand than
prosperity, since the phenomena of overproduction, appearing on the surface of
the market, are visible. One glance is enough to see that consumption cannot
absorb everything that is produced. But it is not so easy to see how capital,
given its inherent contradictions, can proceed for long periods of time from
prosperity to boom, periods during which supply is often smaller than demand.
This is comprehensible through the historically confirmed fact that the market
formed by means of accumulation is nothing other than the development of
capitalist society itself.

This development includes not only the accumulation of the existing capital
but also the continuous creation of new capital: the spread of the capitalist
relations of production over ever broader areas. The exploitation of greater
masses of workers requires additional means of production which must first be
produced before they can be productively utilized a part of the surplus value
transformed into capital enters directly into accumulation through the
continuous circulation among constant capitals. While one constant capital
moves into commodity production others withdraw commodities from circulation
without at the same time producing commodities themselves. This uninterrupted
process and its acceleration make it possible for the increasing quantity of
commodities to find a market, as the latter is continually expanded by the
process of accumulation.

Through the acceleration of accumulation, by perpetual reinvestment, the
increasing production of final goods (which enter into consumption) can also
find an outlet in the general circulation. Under these conditions -- when one
part of capital sets a series of other capitals in motion, the capitalists can
consume more, and the fully employed workers also have more to spend -- the
accumulation of capital is more impeded than stimulated by the growing mass of
commodities, so that the boom already bears within it the seed of crisis.
Production shifts to the consumer-goods industries, which impairs the
profitability of capital as a whole. The fall of the average rate of profit
thereby accentuated then leads to the weakening of the prosperity and finally
to crisis.

What this reveals is not simply a level of consumption too high in
proportion to the requirements of accumulation but a shortage of surplus value
resulting from the process of accumulation itself, which calls for the
restriction of consumption if the going tempo of accumulation is to be
maintained. If the amount of surplus value created in production was great
enough to hasten accumulation even more, the increased consumption would be no
hindrance to further accumulation but could grow together with it. The slowing
of the rate of accumulation, however, reveals that the changing value
relations, leading to a falling rate of profit, no longer allow the maintenance
of the existing level of consumption; that is, that the organic composition of
capital has reached a point at which the available surplus value is
insufficient to secure both growing consumption and accumulation. On the
terrain of the market, the declining rate of accumulation means the decline of
new investments and its effects on production as a whole. The same process that
opened the way to expansion now reverses direction, seizing on more or less all
the branches of social production.

The relation between production and consumption is unaffected in an
expanding capitalism, even if the production of consumer goods lags behind that
of means of production. On the one hand, the growing productivity of labor
makes possible the reduction of the costs of food production; on the other,
rapid industrialization leads to a continuous improvement in the industrial
products destined for consumption and thus an improvement in the general
standard of living. Although accumulation requires the steady increase of means
of production, the commodity market is at the same time continually broadened
by the introduction of ever newer kinds of use values. Surplus-value allows the
construction of an infrastructure that involves ever greater numbers of people
in the process of capital circulation as a whole. If the world market was a
precondition of capitalist production, accumulation has led to an ever more
rapid capitalization of world production, which does not conflict with the
concentration of capital in a few capital-intensive countries as their
production is integrated into that of the world. The accumulation of capital is
thus not only the prosaic production of profit but also the conquest of the
world by capital, an enterprise so demanding that no mass of profit, however
great, will be enough.

Capital is always suffering from a lack of profit, in depression and in
prosperity. Every capital must continually accumulate in order not to be driven
out of business, and accumulation depends on the supply of capital, derived
either from its own profits or from those of other capitals. The market grows
together with the firms, and with the growth of the market the firms also must
grow if they are not to be eliminated by their competition. There has never yet
been a business smothered by its own profits, and capital “as a
whole” has at no time bewailed an excess of surplus value. That a period
or upswing turns into its opposite can only mean, from the standpoint of
capital, that profits were too low to justify the expansion of production in
terms of profitability. Of course, this situation appears to the capitalists
only as a phenomenon of the market, since they do not understand that the level
of their own profits is governed by that of the social surplus value, and since
knowing this fact, if they did know it, could be of no use at all to them,
since the only reaction open to them consists in further attempts to secure or
restore their individual profits by the practically possible ways.

Capitalist prosperity depends on the continuous acceleration of
accumulation, and this on the expansion of the mass of surplus value. Capital
cannot stand still without calling forth crisis. Every equilibrium state
– that is, every situation in which production does not exceed
consumption – is a state of crisis or stagnation that must be overcome by
an increase in surplus value if it is not to lead to the downfall of the
system. Just as the tendency of the profit rate to fall exists in latent form
even when the actual rate of profit is rising, crisis is already inherent,
though invisible, in every prosperity. But like every other disproportionality
of the system, that between surplus value and accumulation can also be altered
only in accordance with the needs of accumulation, operating through anarchic
market processes – only, indeed, through the violence of the crisis. This
is a matter not of the restoration of a lost state of equilibrium between
production and consumption but of the restoration of the disproportionality
whose content is the“proportionality” of surplus value and
accumulation.

If, according to Marx, the real crisis must be explained in terms of
capitalist production, competition, and credit, it must be explained in terms
of accumulation, for this is the meaning of production. It is hastened by
competition and credit but also made increasingly prone to crisis, since the
growing demand for surplus value can exceed by far that actually attained due
to the tendency of the rate of profit to fall and despite the development of
the productivity of labor. If at this point of overaccumulation the quantity of
surplus value can no longer be increased, a situation arises that corresponds
to that in Marx’s abstract analysis, framed exclusively in terms of the
production process, of an uninterrupted accumulation leading to the breakdown
of the system.

However, since this process is that of the reproduction of a total capital
constituted by many capitals, the surplus value is accumulated from then on
only in part; not only does the process of accumulation slow down, but the
potential for structural changes of capital develops, making it possible to
adjust the total surplus value to the needs of further accumulation at the cost
of many individual capitalists, as well as by higher rates of exploitation. In
this sense the overproduction of capital is only temporary, although the
tendency to overaccumulate is permanent.

Thus on the one hand capitalist prosperity depends on the acceleration of
accumulation, while on the other hand this acceleration leads to the crisis of
overaccumulation. For this reason capitalist development is a process shot
through with, and inseparable from, crises in which the requirements of the
reproduction of the capitalist mode of production assert themselves in a
violent way. The reality of these crises naturally does not need to be proven,
as they are directly experienced. The only question is whether they arise from
the system itself and are thus inevitable, or whether they are caused by
factors exogenous to the system and thus can be considered accidental, as
imperfections of the system that can sooner or later be eliminated. For Marx
accumulation without crisis was inconceivable. While from one viewpoint the
crises sweep the difficulties to which accumulation gives birth out of the way,
from another they are the surest sign of the ineluctable end of capitalist
society.

The world trade crises must, according to Marx, “be regarded as the
real concentration and forcible adjustment of all the contradictions of the
bourgeois economy.” Even the aspects of the crisis that cannot be traced
directly back to the capitalist relations of production derive from this source
a particular character peculiar to capitalism. As crises of the world market
affect all countries, although in different ways, and as the ultimate reason
for crisis – the shortage of surplus value appears on the market in
inverted form as an unsaleable excess of commodities, the conditions both of
the crisis and its solution are so complex that they cannot be empirically
determined. When the crisis will break out, its extent, and its duration cannot
be predicted; only that there will be a crisis can be expected with certainty.
Nonetheless Marx attempted to relate the periodicity of crisis to the
reproduction of capital or, more exactly, to the replacement of fixed capital.
As the accumulation of capital is largely a matter of the increase in the means
of production, the replacement and enlargement of fixed capital should be at
least a contributing factor of the periodicity of crisis.

The value invested in fixed capital is in the course of time transferred to
the commodities produced and through their sale transformed into money. The
re-transformation of money into fixed capital (the replacement of the used-up
means of production) is governed by the service life of the latter, which in
turn is determined by the particular characteristics of the various branches of
production. The replacement of fixed capital is, thanks to the development of
technology, at the same time its improvement. This obliges capitalists, in
order to remain competitive, to renew their fixed capital before it is worn
out. This “moral depreciation” of fixed capital, as well as the
general effort to partake in the changing technology, generates capitalist
interest in the shortening of the turnover time of fixed capital. The shorter
it is, the sooner the new investments can partake in the higher productivity
achieved through the continuous revolutionization of the means of production,
and the lower the costs of the “moral depreciation” that precedes
the physical exhaustion of capital. As the average service life of fixed
capital in his day was ten years, Marx wondered whether this might be related
to the ten-year crisis cycle.

Of course, the service life of fixed capital can lengthen or shorten.
However, according to Marx, the issue here is not a definite number of years.
This much seemed evident to him:

The cycle of interconnected turnovers embracing a number of
years, in which capital is held fast by its fixed constituent part, furnishes a
material basis for the periodic crises. During this cycle business undergoes
successive periods of depression, medium activity, precipitancy, crisis. True,
periods in which capital is invested differ greatly and far from coincide in
time. But a crisis always forms the starting point of large new investments.
Therefore, from the point of view of society as a whole, more or less a new
material basis for the next turnover cycle.

Marx did not follow up this vague hypothesis. Although crisis leads to a
temporal concentration of investments and so to a sort of “material basis
for the next turnover cycle,” in the final analysis this is only to say
that “a crisis always forms the starting point of large new
investments,” without thereby explaining the crisis or its periodicity.
And although it is true that in the meantime the capital transformed into
commodities piles up in the form of money, this does not mean that it must
remain in this form until the replacement of the fixed capital. Since the
service lives of different capitals are different, and since they renew
themselves in accordance with their respective starting points, the turnover of
fixed capital is being completed throughout the whole period of upswing, along
with the new investments that constitute accumulation, which bring the cyclical
upswing with them. This process is reversed in crisis, when capital is at first
neither replaced nor newly invested. Only as the crisis proceeds are additional
funds invested in order to raise the productivity of labor. These attempts give
birth to the new prosperity, which is built not only on the replacement of
fixed capital but on further accumulation.

Even if the turnover time of fixed capital plays a certain contributing role
in governing the production process of capital as a whole, this does not
suffice to explain the particular periodicity of crisis. Since crises are,
according to Marx, “the real concentration and forcible adjustment of all
the contradictions of the bourgeois economy”, contradictions whose
particular contributions to the crisis cannot be estimated, the periodicity of
crisis also cannot be treated as due to a particular aspect of the process as a
whole. From the crisis cycle that Marx observed one can only conclude that the
difficulties that characterized the process of development in his time made
possible the maintenance of prosperity for no more than ten years at a time,
and not that capital is therefore destined to a ten-year cycle.

Friedrich Engels wrote later that:

The acute form of the periodic process with its former
ten-year cycle, appears to have given way to a more chronic, long drawn out,
alternation between a relatively short and slight business improvement and a
relatively long, indecisive depression-taking place in the various industrial
countries at different times. But perhaps it is only a matter of a prolongation
of the duration of the cycle. In the early years of world commerce, 1845-47, it
can be shown that these cycles lasted about five years; from 1847 to 1867 the
cycle is clearly ten years; is it possible that we are now in the preparatory
stage of a new world crash of unparalleled vehemence? Many things seem to point
in this direction. Since the last general crisis of 1867 many profound changes
have taken place. The colossal expansion of the means of transportation and
communication -- ocean liners, railways, electrical telegraphy, the Suez Canal
-- has made a real world-market a fact. The former monopoly of England in
industry has been challenged by a number of competing industrial countries;
infinitely greater and varied fields have been opened in all parts of the world
for the investment of surplus European capital, so that it is far more widely
distributed and local over-speculation may be more easily overcome. By means of
all this, most of the old breeding-grounds of crises and opportunities for
their development have been eliminated or strongly reduced. At the same time,
competition in the domestic market recedes before the cartels and trusts, while
in the foreign market it is restricted by protective tariffs, with which all
major industrial countries, England excepted, surround themselves. But these
protective tariffs are nothing but preparations for the ultimate general
industrial war, which shall decide who has supremacy on the world-market. Thus
every factor, which works against a repetition of the old crises, carries
within itself the germ of a far more powerful future crisis.

This is to say that the periodicity of crisis also has its history and is
affected by historical circumstances. If the ultimate reason for every crisis
is capitalism itself each particular crisis differs from its predecessors just
because of the continuous transformation of world market relations and of the
structure of global capital. Under these conditions neither the crises
themselves nor their duration and gravity can be determined in advance, and
this all the less as the symptoms of crisis appear after the crisis itself and
only bring the crisis to the attention of the population. Moreover, the crisis
cannot be reduced to “purely economic events, although it arises
“purely economically,” that is, from the social relations of
production clothed in economic forms. The international competitive struggle,
fought also by political and military means, influences economic development,
just as this in turn gives rise to the various forms of competition. Thus every
real crisis can only be understood in connection with social development as a
whole.


     From : Marxists.org

Events :
----------------------------------

     Chapter 2 -- Added : March 03, 2021

About This Textfile :
----------------------------------

     Text file generated from : 
http://revoltlib.com/