When is a Financial Crisis not a Financial Crisis?

Abstract

I shall attempt to explain why Marx thinks that the behaviour of the financial system, let us imagine it as the tail, follows from the tendential behaviour of the productive economy, our dog. Marx does not think that the tail wags the dog; rather the tail merely helps the dog run faster to where it was going anyway. The productive economy is running inevitably to crisis because profitability has a tendency to fall in boom; our dog becomes fat with constant capital and begins to slow. Crisis is a crash diet/destruction of constant capital, which is absolutely necessary to restore the profit rate and let a leaner dog run free again. Attempting to cure crisis by state encouraged creation of credit is no solution precisely because crisis is necessary to restore the profit rate, so postponing crisis merely prolongs low profitability and leads to stagnation. It is akin to our fat old dog becoming lost, following its tail into various disruptive dead-ends (fictitious capital bubbles, usurious lending to people and governments, and numerous other speculative adventurous paths), unable to find the only place, the crisis, it needs to renew itself. It is for this reason that I will argue that interpreting the current crisis as an avoidable ‘accident’ of the financial systems own making is naïve, as no reform of the tail can hope to change the nature of the dog.