Crisis theory

Crisis theory has been the subject of much debate^[1] within the history of the Marxist critique of political economy. Its few perceptive exponents faired very badly during the vagaries of Stalinist orthodoxy^[2]. It is concerned with explaining the business cycle, recession and crises in capitalism, drawing particularly on Karl Marx's achievement in articulating the Law of the Tendency for the Rate of Profit to Fall arising out of the consequences of value relations.

Roman Rosdolsky noted in his examination of the development of the theory from the Grundrisse to Capital that … “Marx concludes by saying that the law of the tendency of the rate of profit to fall is ‘in every respect the most important law of modern political economy … despite its simplicity, it has never been grasped and even less, consciously articulated … It is from the historical standpoint the most important law.’”^[3]

Marx believed he had provided a comprehensive account of the inner dynamics of capitalist social organization. According to those who understand him, he offered a complete crisis theory, Marx demonstrated that the particular form social investment takes under capitalism, c:v (constant capital : variable capital), works initially to accelerate, but latterly to strangle the long-wave development of mankind's means of production proportional to our labour power, M:L. Given that the advancement of M:L is the foundation of all material progress and thus social progress for Marx, proving that capitalism retards M:L is all the proof Marx needed that capitalism was becoming obsolete. The alternative to replacing capitalism would be for its ever-present crisis to drag humanity back to barbarism, destroying the gains that capitalism itself had created.

Marx's precise workings-out, with their reliance on a customized version of the dialectic method salvaged from Hegel, resist summarization. However, the important sections come in Capital Volume 3, particularly in Part 3 - The Law of the Tendency of the Rate of Profit to Fall. A seminal attempt was made to re-present aspects of the working out of the theory in a mathematical form in the work of Henryk Grossman. Central to the argument is the claim that, within a given business cycle, the accumulation of surplus from year to year leads to a kind of top-heaviness, in which a relatively fixed number of workers have to add profit to an ever-larger lump of investment capital. This observation leads to what is known as Marx's law of the tendency of the rate of profit to fall. Unless certain countermeasures are available to be taken, the exponential growth of capital out-paces the growth in labor productivity, so the profits of economic activity have to be shared out more thinly among capitals, i.e., at a lower profit rate. When countermeasures are unavailable or exhausted, the system requires the destruction of capital values in order to return to profitability.

Influence

The place of crisis theory within Marx's theory is central and recurs throughout his writings and correspondence. This is one of the abiding and most revolutionary aspects of Marx's work. Alongside Lenin’s complementary study of the barbarous dynamic of capitalism^[4], this theory underpins marxists’ understanding of the enduring necessity for systemic change. Its contested treatment is therefore unsurprising, and as Roman Rosdolsky explains … “The assertion that Marx did not propose a ‘breakdown theory’ is primarily attributable to the revisionist interpretation of Marx before and after the First World War. Rosa Luxemburg and Henryk Grossman both rendered inestimable theoretical services by insisting, as against the revisionists, on the breakdown theory.”^[5] More recently David Yaffe 1972,1978 and Tony Allen et al 1978,1981 in using the theory to explain the conditions of the 1970’s and 80’s re-introduced the theory to a new generation and gained new readers for Grossman's presentation of Marx's crisis theory. Paul Mattick's Economic Crisis and Crisis Theory published by Merlin Press in 1981 is an accessible introduction and discussion derived from Grossman's work. François Chesnais's [1984] chapter Marx's Crisis Theory Today in Christopher Freeman ed. Design, Innovation and Long Cycles in Economic Development Frances Pinter, London, discussed the continuing relevance of the theory.

See also

• Crisis (Marxian)

Further reading

• Allen, Tony et al 1978 The Recession: Capitalist Offensive and the Working Class RCP 3, July 1978, Junius
• Allen, Tony 1981 World in Recession in RCP 7, July 1981, Junius
• Bullock, Paul and Yaffe, David 1975 Inflation, the Crisis and the Post-War Boom RC 3/4 November 1975, RCG
• Chesnais, François [1984] Marx's Crisis Theory Today in Christopher Freeman ed. Design, Innovation and Long Cycles in Economic Development 2nd ed. 1984 Frances Pinter, London
• Clarke, Simon 1994 Marx’s Theory of Crisis Macmillan
• Day, Richard B 1981 The ‘Crisis’ and the ‘Crash’: Soviet Studies of the West (1917-1939) NLB
• Grossman, Henryk The Law of Accumulation and Breakdown of the Capitalist System Pluto 1992
• Lenin V.I. Imperialism, the Highest Stage of Capitalism
• Mattick, Paul Marx and Keynes Merlin 1974
• Mattick, Paul Economic Crisis and Crisis Theory published by Merlin Press in 1981
• Rosdolsky, Roman The Making of Marx’s ‘Capital’ Pluto 1980
• Shoul, Bernice The Marxian Theory of Capitalist Breakdown 1947
• Yaffe, David 1972 The Marxian Theory of Crisis, Capital and the State, Bulletin of the Conference of Socialist Economists, Winter 1972, pp 5–58
• Yaffe, David 1978 The State and the Capitalist Crisis 2nd ed RCG Reprint

References

1. ^ Clarke 1994
2. ^ Day 1981
3. ^ Rosdolsky 1980.381
4. ^ Lenin, Imperialism
5. ^ Rosdolsky 1980.382 fn32

External links

• "Crisis of Capitalism" by MIA Encyclopedia of Marxism
• Capital, Volume 1, "Chapter 1" by Karl Marx