Michael R. Krtke Lancaster University Marx Theory or Theories
of Crisis
Slide 2
The enigma of Marx theory of crisis The conventional
(Marxist)view today: There is one (and only one true) theory of
crisis in Marx in chapter 15, of volume III of Capital The opposite
view: There is no theory of crisis in Marx at all The traditional
view: There are several theories of crisis in Marx Capital, without
a clear-cut hierarchy, these might be difficult or even impossible
to reconcile The evidence from the MEGA: Marx has worked again and
again on a coherent and comprehensive theory of crisis (based upon
intensive empirical studies) - for several reasons: - against Says
law, against vulgar political economy, against fellow socialists -
because of the importance of the relatively new phenomenon of
cycles and crises (the crisis cycle being the specific mode of
motion and development for modern, that is industrial
capitalism)
Slide 3
Marx and Sam Moore Exchange between Sam Moore and Marx in the
early months of 1873 (letter to Engels, May 31, 1873) Marx
ambition: to arrive at the main laws of the crises by analyzing all
the data available and putting them into the form of irregular
curves (formulas) Sam Moore thought it not feasible at that time
Marx told Engels that he had given up the idea But he did not give
it up entirely! The famous episode shows: 1. Marx was a seasoned
empirical researcher, 2. adamant about finding and establishing
general laws, 3. Marx did not study the calculus just as a pastime
activity.
Slide 4
Bhm-Bawerk and Marx Bhm Bawerk 1898: a theory of crisis is only
possible at the end of any comprehensive treatise on economic
theory (as ist last chapter or book) Marx in 1857/58 (in the
various versions of the 6 books plan): the theory of crisis will
come at the end, in the last book of his comprehensive critique of
political economy Book 5 (or 6) : World market and crises In spite
of all the changes of his plan (starting in the Grundrisse) he
never dropped it entirely In Capital (in all three volumes plus
manuscripts) anticipations of and direct hints to an analysis and
explanation of crisis and cyles abound (which is only to be spelled
out at the very end)
Slide 5
Marx theories of crisis Anarchy of the capitalist mode of
production Underconsumption theory Profit squeeze theory
Disproportionalities Overaccumulation (or the TFRP) Which one is
the real one? (Marx preferred theory?) the basic concept: General
Glut Overproduction of commodities (including Overaccumulation of
Capital) Can those theories be reconciled and /or integrated into
one comprehensive theory? Very few attempts so far (Otto Bauer in
1934/35, Simon Clarke in 1994)
Slide 6
If the evidence from Capital is inconclusive Let us have a look
at Marx real research process We cannot possibly know how Marx
unfinished, incomplete theory of crisis would have looked like in
its final version But we can know and scrutinize what Marx actually
did during the years he kept working on his critique of political
economy We have (in the MEGA, partly published, partly still
unpublished) ample evidence for Marx ongoing research process (from
1843 to 1883)
Slide 7
Marx main sources Theory: the general glut debate (Say,
Ricardo, James Mill, Malthus, Torrens, Sismondi) Empirical,
historical research by others: Thomas Tooke (History of Prices),
Gilbart, MacLeod and others The parliamentary enquiries of the
crises since 1847/48 (several big reports by Select Committees of
the House of Commons) The Economist, Money Market Review and others
Bank of England reports plus reports from other major (central )
banks The crisis literature of 1848/49, 1858/59,1866, 1873ff
Round one: the 1840s 1846-47 Studies of Economic History: What
is peculiar about modern / capitalist crisis? Statistical notes on
the crises of 1825 and 1836 Marx thesis: Every modern crisis
actually enhances the level of (industrial) production 1848 49
Studying the mechanism of crisis: Why does an industrial crisis
appear as a financial crisis? Why and how does a crisis originating
in Britain shift to France? General laws and specific mechanisms,
general long term tendencies and particular laws of motion
Slide 10
Round 2: the 1850s 3 political economic reviews of 1850
(dealing with the events of 1847/48 and later) 24 London notebooks
of 1850 1853 First small pieces of anaysis: Bullion and Reflection
of 1851 Marx studies and comments upon crisis tendencies and the
next crisis to come (1850 1857) (in various newspaper articles)
Marx manuscript Money, Credit, Crisis (1854-55) All demonstrate how
empirical study and theoretical reflection (rethinking of concepts
and theories) are intertwined in Marx research Marx already tries
both: Giving historical explanations of the peculiar events
occurring in specific crises and establishing laws regarding their
regularities / commonalities
Slide 11
Lessons learned, problems unsolved Money matters a lot, the
particular form of the monetary system has an impact Money and
credit (financial) crises could occur separately! But they are also
an integral moment of every single crisis in industrial capitalism!
Trade and commerce matter a lot, hence commercial credit matters
and bank credit even more (leading to overcredit and
overspeculation)! Hence: in order to deal with crisis we have to
deal with the different forms / types of capital and the whole
hierarchy of markets What is behind aggregate effective demand ?
The class structure of modern society Disproportionalities arise
from competition between industrial capitals commercial and
financial capital can acerbate them decisively Financial markets /
monetary transactions are the means to shift the crisis from one
part of the capitalist world to another (an industrial crisis
originating in England appears as a financial crisis in France)
Hence: how to reconcile the explanation of the concrete mechanisms
of crisis with the explanation of the possibility and necessity of
a general glut (how are overproduction / overaccumulation in some
industries generalized)? Crises can be late! Why? (what disturbs
the normal cycle?)
Slide 12
The Grundrisse and the First World Economic Crisis
Slide 13
Round 3: The world crisis of 1857/58 Grundrisse manuscript, the
Books of crisis plus journalism Grundrisse: the first systematic
discussion of Ricardo and Say and their critics Marx commenting
upon the general glut debate and taking issue with both sides Marx
criticizing the false explanations of crisis cherished by the
socialists /leftists of his time (Proudhon and his disciples) The
first real world economic crisis the true scale and scope of a
world market crisis (different from the previous ones) Marx is
studying the events in much empirical / statistical detail,
preparing a book (together with Engels) on the crisis of 1857/58
Explaining the course of crisis events in different sectors of the
economy, on different markets, in different parts of the world
market (prices, interest rates, bank reserves and circulation of
money, wages, unemployment, freight rates, bankruptcies)
Slide 14
The lessons of 1857/58 The changing importance of industrial,
commercial and financial crisis (from 1836/37 to 1847/48 to
1857/58) The wide impacts of a general crisis in the industrial
centre of the world market (the centre and the peripheries) The
impact of false economic and financial (banking, money market)
regulations (in Britain and abroad) How financial market crises
turn into a fiscal crisis of the state (public debt crisis) The
importance of international speculative capital (railway
speculations) Open questions: why are some crises lasting longer
than others, why are different parts of the capitalist world
affected differently (coexistence, compossibility of crisis and
prosperity), how and why do crises rapidly spread out all over the
globe, how and why can a crisis be overcome? Why is this long
expected crisis over in a few months time?
Slide 15
Reinventing the Tableau conomique
Slide 16
Round 4: Marx research manuscript of 1861 63 Marx second and
most extensive critique of the general glut debate in the Ms of
1861 63 (again taking issue with both sides, and with the
socialists) Rethinking crisis research: How to explain the reality
and necessity of crises and the regular form of the industrial
cycle in terms of a general theory of modern capitalism? In order
to do this, Marx proceeds with the sketchy analysis of the
circulation process of capital (looking at its different phases in
much detail) [unfortunately, some parts of the manuscript are
damaged, so we dont know all the parts of this investigation] In
order to do this, Marx reinvents the analysis of the total
reproduction / accumulation process his own tableau conomique of
1862 (first a graph, like Quesnays) In order to do this, Marx
investigates capitalist dynamics: the rise of the organic
composition of capital (cotton crisis) and the turnover of fixed
capital, accelerated accumulation, accelerated turnover, the value
revolutions (already briefly considered in the 1857/58 ms) and the
price revolutions A new plan: How to integrate building blocs of a
theory of crisis into the theory of capital? Bits and pieces of it
are presented from the very beginning until the end, from the most
abstract and simple forms to the most complex and complicated
(concrete) forms of capitalist competition and credit
Slide 17
Marx discussing Ricardo, Say, Mill The core of the general glut
debate: General crisis (not partial crises in particular industries
/ markets) are not only possible, but inevitable (necessary)
Overproduction of commodities (not simple, but the modern kind of
commodities) and overaccumulation of capital (in different forms)
are the basic phenomena of every general crisis in capitalism What
is the common foundation /general condition for all modern crises
of overproduction / overaccumulation: the The meaning of crisis in
capitalism: Crises are the moments in the course of capitalist
development when all the contradictions of capitalism come all
together to an eruption hence, the why and when and how of the
moment of eruption has to be explained Crises are the moments when
the basic unity between the disconnected and formally independent,
but intrinsically connected actions in the marketplace and
processes of production, reproduction and consumption is restored
in a violent, destructive way Hence: crises in capitalism are
moments of intense tensions and conflicts, but also necessary for
the very existence and continued reproduction of modern capitalism
- they are the constitutive phase of the cycle (of boom and bust)
as the specific mode of motion of modern industrial capitalism
Crises in capitalism are moments of necessary destruction
(destruction of use values, depreciation / destruction of values,
depreciation / destruction of capitals, depreciation / destruction
of land / nature, depreciation / destruction of human labour power)
Because of that process of depreciation / devaluation / destruction
of values and capital, crises provide (potentially) a veritable
rejuvenation cure for capitalism and/or they serve as turning
points in the course of capitalist development
Slide 18
Marx outline of a plan Forms / possibilities of crisis versus
actual crises From the mostabstract forms of crisis to more
concrete forms of crisis Analysing ever more new forms of crisis
with different meanings advance both in the analysis of specific
forms and of the contents of crisis (some of them, like the form of
a monetary crisis / credit crisis, are both general and specific
forms of crisis) Analysing both the dynamics of capitalist
accumulation /extended reproduction and the dynamics of market
extensions When, how and why do the many potential crises turn
(inevitably) into an actual crisis? Where do we find the conditions
of crisis in the different phases of the circulation and
reproduction process of capital A new idea / plan for the end
(final chapter) of Capital: back to the analysis of total
circulation only through the analysis of the Gesamtprozess (total
process of capital reproduction) The tendency of the rate of profit
to fall does not matter at all! On the contrary, Marx is explicitly
criticizing the view, as he find it in Adam Smith, that a fall in
the general rate of profit would lead to crises (hence, the often
quoted statement: There are no permanent crises.)
Slide 19
Round 5: the crisis of 1866 This time (again) it is and it
looks like a financial crisis, as it assumes a predominantly
financial character Marx expands his thoughts on monetary and
credit crises (already in the ms of 1861-63) regarding the causes
of financial market crises (overcredit and overspeculation)
Financial crisis as consequence of the financial market reforms
since 1862 (collapse of swindling companies) Hence: corporate law,
financial regulations do matter Crisis phenomenon: money market
crisis, starting with the failure of a giant London bank How the
financial crisis affects industrial and commercial capital Behind
the crisis: another major shift in the structure of the world
economy (after the end of the US civil war)
Slide 20
Marx studies of money markets and their crises from 1867
onwards Another series of financial market studies after the
publication of Capital, volume I Again: world money, currencies and
financial market crises (in the centre and in the periphery) Hence:
back to the study of the theory of foreign exchange (Gschen) Hence:
back to the study of the history and theory of banking (Gilbart)
the role of the Bank of England as lender of last resort Marx
starts studying the basics of accountancy (from 1869 onwards) and
banking techniques why?
Slide 21
Round 6: Marx study of the first half of the Long Depression
Again a series of notebooks (excerpts and few comments, collections
of statistical material) on financial markets and banking, on
public credit in Britain, USA, Russia, Germany Marx understands the
very peculiar character of the crisis (as the first phase of the
first Great Depression of 1873 -1895) Hence new problems: Explain
the great crises and why and how they are different from normal
crises in previous cycles! Again: Major shifts in the capitalist
world economy (rise of industrial agriculture in the USA, the rise
of New York ) Alternatives: long term stagnation or another huge
world crisis! Again: the tendency of the general rate of profit to
fall does not matter
Slide 22
Crisis in Capital Evidence and Interpretation Marx uses his
notebooks and excerpts from 1846 onwards extensively for the first
drafts of Capital, volume I, II and III (of 1864-65) In Capital,
Volume I (1867, 1872, 1872-75) Marx comments upon the crises from
1815 to 1866 Marx uses his later notebooks (from 1868 onwards) in
his later manuscripts for Capital, volume II Hence: various
references to the crises of 1957/58, 1866 and 1873 79 in the 8
later ms for Capital, volume II Marx hesitates to finish Capital,
volume II because of the events of the great crisis of 1873 79 In
Capital, volume III (ms of 1864/65) no reference to the events of
1866, 1873 -79 Marx accumulated material for core sections of
Capital, volume III (in particular section V) goes far beyond the
ms of 1864/65 To use this, Marx would have to reorganize the
chapter!
Slide 23
The mechanisms of crisis and its laws 1870s exchanges with
Engels, Danielson and Sam Moore (and others) about the explanation
of the (changing) nature and the (changing) mechanisms of crisis
and cycles Marx in 1879/80: taking stock of the first phase of the
first Great Depression (a transformation of capitalism / the world
market still in the making / the end of British industrial
supremacy / another industrial revolution in the making?) Marx
realizes that this crisis is quite different, he anticipates the
possibility of a long depression Consequences for the critique of
political economy: How did Marx plan to change Capital (again)? (
Money, credit and banking, Central banks and international
financial markets, Agricultural crisis, commodity speculation,
resource wars, Sterling replacing gold as world money) The USA as a
new model for advanced capitalism
Slide 24
Taking Marx seriously the state of the art in 1882 A book on
worldmarket and crisis was still the culmination of Capital Marx
was not yet clear about the peculiar character and the fundamental
causes (the necessity) of crisis in modern capitalism except for a
between the Marx was clear about core mechanisms of many particular
crises (money market crisis, credit crisis, banking crisis,
financial crisis, commercial crisis, industrial crisis) Marx was
not (completely) clear about the mechanism of the generalization of
crisis (as he had not completed his analysis of the basics of the
macroeconomic dynamics of capitalism) Marx was not clear about
(all) the links between crisis and transformations of capitalism
(although he clearly saw a link: Marx never ever made any reference
to the falling general rate of profit as the ultimate or the
immediate or intermediate cause of crisis (how could he?
Slide 25
Could Marx theory of crisis be (re)constructed? Several debates
in the era of classical Marxism (Kautsky was the first to open the
debate already early in the 1890s) Tugan Baranowsky and his critics
(Kautsky, Bauer, Hilferding, Pannekoek and others) Main
contributions by the Austro-Marxists (Bauer 1904, Hilferding 1910)
Luxemburg debate (from 1913 to the 1940s) the beginning of a
serious Marxian macroeconomics (starting with the critique of
Luxemburgs Accumulation of Capital and her critique of Marx) The
challenge of the Great Crisis of the 1930s (Moszkowska, Bauer,
Braunthal, Leichter, Sternberg, Preobrashensky, Dobb, Corey,
Sartre, Varga, Boudin, Kuruma, Uno and some others) Grossmanns
exceptionalism (his view was not accepted by any of the serious
Marxist economists of the 1920s and 1930s) Otto Bauers effort to
put together what can be combined (unpublished study of the world
economic crisis, written in 1933 35)
Slide 26
Can Marx theory of crisis be reconstructed ? Yes, but The real
heritage of Marx are the many unsettled questions of his critique
of political economy (I dont give the full and very long list here)
Accordingly: Marx theory of crisis can be put together from the
elements he left us, under one condition that the many unsettled
questions of Marxtheory of political economy are dealt with and
maybe settled
