Abstract
Capitalism as a historically specific social formation contains inner contradictions which appear most obviously in those periodical self-destructive crises, in the process of business cycles. The classical school and the neo-classical school treated capitalism one-sidedly as a harmonious economic order and disregarded both its historical character and its inner contradictions. A natural result was a lack of crisis theories in these schools. A great advantage of Marx’s Capital as compared to these schools is its comprehensive attempt to clarify the logical inevitability of periodic business cycles and crises from the basic contradictions in capitalism. However, Capital was left incomplete, especially in this field, and theoretical positions among Marxians have been diverse here. In my opinion, there are initially three major sources of confusion to be established and then cleared up as far as possible.
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Notes
G. Haberler, Prosperity and Depression (London: George Allen and Unwin, 1937, 4th ed., 1964) p. 7.
R. Hilferding, Finance Capital, translated by M. Watnick and S. Gordon (London, Boston and Henley: Routledge and Kegan Paul, 1981 ) p. 261.
M. Tugan-Baranowsky, Les Crises Industrielles en Angleterre (translated by J. Schapiro, Paris: M. Giarde and É. Brière, 1913)
Against these, K. Kautsky, ‘Krisentheorien’ and ‘Finanzkapital und Krisen’, in Neue Zeit (20, no. 2, 1901–2, 29, no. 2, 1911)
or N. Bukharin, Imperialism and the Accumulation of Capital, translated by R. Wichmann, (New York and London: Monthly Review Press, 1972), asserted the underconsumptionist variant of crisis theory as an orthodox Marxian position. In these classical arguments initiated by Tugan-Baranowsky, Marx’s theory of the reproduction schemes was much utilised in order to show the difficulties in maintaining the balance between various items in the schemes, although essentially it was an unsuitable theory for proving the logical inevitability, and not merely the possibility, of periodical crises, as we saw in Chapter 6, Section 6.3. More recently
P. Sweezy, The Theory of Capitalist Development (1942, New York: Monthly Review Press, 1956), ch. 10, and his other writings follow the orthodox Marxian position of the under-consumptionist type.
N. Okishio, [The Theory of Accumulation] (Tokyo: Chikuma-Shobo, 1976) for instance, presents a sort of sophisticated type of underconsumptionism in a model of the cumulative process of disequilibrium between the effective demand of wage-workers and the increasing productive power of society. In his model, incessant shortage of effective demand due to restricted real wages can be balanced more than sufficiently by investment demand so as to cause a rise in commodity prices or inflation in the phase of prosperity. With this rise in prices, real wages must fall more and more so that reproduction of labour-power becomes impossible to maintain. A reversal of such a process of accumulation through crises is necessary for capitalism to survive as a social system. Though Okishio sees the operation of the law of value in the reversal of the cumulative upward and downward process of disequilibrium in turn, he tends to negate the working of the law of value in readjusting the disequilibrium between demand and supply with relative stability in the process of prosperity. It is also difficult for me to agree with his recognition that real wages must fall in the actual process of prosperity when in fact expanding employment creates a shortage of labour-power.
H. Grossmann, Das Akkumulations and Zusammenbrucksgesetz des kapitalistischen Systems (Leipzig: Hirschfeld, 1929), assumes an increase of variable capital of 5 per cent a year and of constant capital of 10 per cent with a constant rate of surplus-value of 100 per cent in order to show the breakdown of a capitalist system due to the disappearance of the portion of surplus-value for consumption by capitalists.
E. Preiser, ‘Das Wesen der Marxschen Krisentheorie’, in Festschrift für Franz Oppenheimer — Wirtschaft and Gesellschaft (Frankfurt: Frankfurter SocietatsDruckerei, 1924) assumes a fall in the rate of surplus-value, as in the labour-power-shortage theory, in his example of the sudden decline of the rate of profit.
M. Dobb, Political Economy and Capitalism (London: Routledge and Kegan Paul, 1937) ch. 4, and E. Mandel, Late Capitalism, translated by J. De Bres (London: New Left Books, 1975) combines this variant of crisis theory with varying circumstances in a multicausal approach.
D. Yaffe, ‘The Marxian Theory of Crisis, Capital and the State’, in Bulletin of the Conference of Socialist Economists (Winter 1972)
P. Bullock and D. Yaffe, ‘Inflation, the Crisis, and the Postwar Boom’, in Revolutionary Communist, no. 3/4 (Nov 1975) stand purely upon the law of tendential fall of profit rate as the causal basis for crisis. A. Shaikh, ‘An Introduction to the History of Crisis Theories’, in URPE U.S. Capitalism in Crisis (New York: Monthly Review, Press, 1978) assesses this latter type of approach favourably.
K. Marx, Grundrisse, translated by M. Nicolaus, (Harmondsworth, Middx: Penguin Books, 1973 ) p. 766.
This ability of trade-union bargaining-power to squeeze the profit rate is underlined in A. Glyn and B. Sutcliffe, British Capitalism, Workers and the Profit Squeeze (Harmondsworth, Middx: Penguin Books, 1972)
P. Armstrong, A. Glyn, G. Harrison, Capitalism since World War II ( London: Fontana, 1984 ).
‘It is one of Uno and his followers’ contribution to Mandan theory to have underlined this aspect of Marx’s theory and to have attempted to show the logical necessity of periodical crisis through the working of the credit system and the interest rate. This corresponds to their position which emphasises the importance of the forms and the mechanisms of a capitalist economy besides its internal substantive relations of production. P. Bullock and D. Yaffe, ‘Inflation, the Crisis, and the Postwar Boom’, Revolutionary Communist, 3/4 (Nov 1975), contains one of the rare attempts among Western Marxians to examine how the credit mechanism operates up to the crisis, although it is based upon the rising organic composition variant of the excess-capital theory of crisis and so is different from the Uno School.
This is the moment when money appears as the sole incarnation of wealth, as was believed by the bullionists, and thus the ‘sudden transformation of the credit system into a monetary system adds theoretical dismay to the actually existing panic’ (K. Marx, A Contribution to the Critique of Political Economy, Moscow: Progress Publishers, 1970, p. 146 ).
Following up Uno’s crisis theory, M. Yoshitomi, ‘[Credit and Business Cycles]’, in K. Suzuki, ed., [Studies in Credit Theory] ( Tokyo: Hosei University Press, 1961 )
K. Baba, [The World Economy, Its Centre and Periphery] (Tokyo: University of Tokyo Press, 1973) raised this problem and presented a solution in this direction.
K. Uno, [The Tasks of the Crisis Theory], in his [Problems in Marxian Economics](Tokyo: Iwanami-Shoten, 1969), argued that the contents of the necessary means of consumption for wage-workers are determined through the capitalist process of business cycles. A linkage between value theory and crisis theory is thus being sought out, together with a critique of a misconception that the real wage is determined entirely outside of the law of motion of capitalism. However, I cannot totally agree with him where he seems to neglect the ‘historical and moral element’, possibly including social forces in the determination of real wages, even in the basic theory.
For instance, P. Armstrong, A. Glyn, J. Harrison, Capitalism since World War II (London: Fontana, 1984) among others, show empirically that over-accumulation in this regard was the major cause for the beginning of the recent great depression.
A representative work from this viewpoint is P. A. Baran and P. Sweezy, Monopoly Capital (New York and London: Monthly Review Press, 1966).
Parvus (alias A. Helphand), Die Handelskrisen and die Gewerkschaften ( München: M. Ernst, 1901 ).
K. Kautsky, ‘Die Wandlungen der Goldproduktion and der wechselnde Charakter der Teuerung’, in Die Neue Zeit, supplement to no. 16 (Jan 1913).
Russian orthodox studies of the theories and the history of business cycles and crises have not been entirely immune from such a tendency. See for instance L. A. Mendelison, [The Theory and History of Economic Crises], translated into Japanese by K. Iida et al., (Tokyo: OtsukiShoten, 4 vols, 1960–1), and I. A. Trakhatenberg, [The Money Crises], translated into Japanese by A. Oikawea, (Tokyo: Iwasaki-Gakujitsu, 3 vols, 1967–8). Their prestige was effectively weakened by the historical experience of the sustained long upswing in the post-Second World War period.
N. D. Kondratieff, ‘Die Langen Wellen der Konjunktur’, in Archiv für Sozialwissenschaften and Sozialpolitik, Bd 56 (1926), ‘The Long Waves in Economic Life’, in Review of Economic Statistics, 60 (1935).
J. A. Schumpeter, Business Cycles 2 vols, (New York: McGraw-Hill, 1939 ). As is well known, Schumpeter called the regular business cycles of between about eight and ten years duration ‘Juglar cycles’, and the shortest business cycles mainly due to fluctuations in inventory investment ‘Kitchin cycles’.
L. P. Trotsky, ‘On the Curve of Capitalist Development’, in Fourth International (May 1941).
E. Mandel, Long Waves of Capitalist Development (Cambridge: Cambridge University Press, 1980) pp. 21, 55. See also his Late Capitalism (op. cit.) ch. 4.
D. M. Gordon, R. Edwards and M. Reich, Segmented Work, Divided Workers (Cambridge: Cambridge University Press, 1982) ch. 2.
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© 1988 Makoto Itoh
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Itoh, M. (1988). Business Cycles and Crises. In: The Basic Theory of Capitalism. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-19107-9_9
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