THE MARXIAN CRISES THEORY

    Marx has, therefore, considered the crises in the many-sidedness of their modifications and manifestations. He analysed the many-sided moments which crises may evoke and has shown how the crises develop in all spheres and forms of capitalist economy.

    Marx finds the general possibility of crises in the fact that the products are produced as commodities.

" In the case of direct barter production on the part of the producer is mainly directed towards the satisfaction of his own needs or, with the somewhat wider development of the division of labour, the needs of co-producers known to him. It is only the excess which is exchanged as commodities and whether the excess is exchanged or not, is not essential. In the case of commodity production the conversion of the product into money, the sale, is a conditio sine qua non (absolute condition,-Editor). Direct production for one's own needs falls to the ground. With the non-sale we get the crises.", (Marx, Theories of Surplus-value, Vol. II, Part 11, 281.)

    In so far as society produces the products as commodities, i.e., in so far as we have before us a commodity economy, the possibility of crises are already contained in the very commodity nature of the society.

   Direct barter is the earliest stage of exchange where the chief mass of the products are manufactured for direct needs and only an excess of them appears as commodities which are directly exchanged against other commodities.

   For every commodity must here be exchanged for money. The inherent antagonism of use value and value contained in the commodity finds its expression in the separation of the world of commodities and that of money. In a commodity society:

Sale and purchase cannot exist without each other; they form an inner unity:

" But no one is forthwith bound to purchase because he has just sold." (Capital, p. 127.)

    Purchase and sale are, at the same time, thus separated from one another. This break between purchase and sale in commodity exchange:

   Now if the peasant does not sell his wheat he cannot also buy any linen; but this means that the owner of the linen can no longer come forward as a buyer of a Bible. But if, on the other hand, the peasant sells his wheat and yet refrains from buying the linen or other commodities, and keeps the value included in the wheat in the money form, a break between purchase and sale will similarly set in. And when, in consequence of the exchange dependence of all acts of purchase and sale, this separation becomes general and extends over the whole chain of exchange relations, then there is an outbreak of a crisis.

   Here, however, we merely deal with the possibility of a crisis. But crises need not necessarily break out, as purchase may also follow sales directly one after the other.

" These modes (i.e., the conversion of commodities into money and money into commodities,-Editor), therefore imply the possibility, and no more than the possibility, of crises. The conversion of this mere possibility into a reality is the result of a long series of relations, that, from our present standpoint of simple circulation, have as yet no existence." (Marx, Capital, Vol. I, p. 128.)

(b) MONEY AS A MEANS OF PAYMENT AND THE POSSIBILITY OF CRISES

   The general possibility of crises which is inherent in the commodity form of social production, attains its further development in the expansion of credit and the functioning of money as a means of payment (i.e., goods are sold but the money for it is paid only after the lapse of a certain time, and it is then only that the business is concluded; money thus exercises the function of credit).

    During the space of time which lies between the moment of inception of the credit operation and that of the actual payment of the money, the value of the commodity may change. The payment might, besides this, not be made in time. The separation between purchase and sale and the independence of one from the other then again become revealed. The peasant for instance buys 20 yards of linen at the price of 40 marks. He does not, however, pay this money immediately, as he has not yet sold his wheat, the value of which is similarly 40 marks. The weaver, on his part, buys machinery which he promises to pay after he will have received the money from the peasant. But if the value of the wheat changes at the time when the peasant can sell it and he can realise for it less than 40 marks or if the peasant cannot sell it at all, he can of course make no final settlement with the weaver. The result of this is that the weaver is also unable to pay the manufacturer of the machinery, etc.

   Credit ties up in this way all commodity producers who participate in credit operations by a chain of reciprocal dependence. The consequence of the break of any link of financial obligations may result in a shock to the whole chain, i.e., a crisis might break out.

" The spinner cannot pay because the weaver cannot pay; both of them do not pay the machine manufacturer who does not pay the iron, timber and coal merchant. All these again cannot meet their obligations as they have not realised the value of their commodities . . . and a general crisis thus arises." (Marx, Theories on Surplus-Value, Vol. II, Part II, p. 284-285.)

    This second possibility of a crisis, as Marx calls it, can only develop on the basis of the first :

" Crises are possible without credit, without money functioning as a means of payment. But the second (the credit crises,-Editor) is not possible without the first (the crises possibilities,-Editor), i.e., that purchase and sale falling asunder." (Ibid., p. 288.)

    The second possibility of a crisis which is based upon the extension of credit represents a further development of the possibilities of crises. The possibility of crises inherent in the contradiction of commodities can set in more easily and more rapidly with the development of credit operations. But also here the crises need not NECESSARILY always break out. This is why Marx considers also the second form of crises merely as a possibility, it is true as a more developed form than the first, but nevertheless a form which does not yet condition the inevitability of crises.

(c) THE DEVELOPMENT OF POSSIBILITIES OF CRISIS IN THE MOVEMENT OF CAPITAL

" No crisis can exist without purchase and sale be coming separated and entering into contradiction one with the other." (Ibid., p. 285.)

    Commerce by direct barter does not (as we have already mentioned) contain within itself the possibility of a crisis.

" We have never heard that the ancients with their slave production knew of any crises, although even among them there were cases of individual producers becoming bankrupt." (Ibid., p. 277.)

" The simple circulation of money and even the circulation of money as a means of payment (and both had existed long BEFORE capitalist production, without crisis happening) are possible and did, indeed, exist without crisis." (Ibid., P. 285.)

   It is only the transformation of simple commodity production into capitalist economy which creates the conditions under which the possibility of crisis existing within the framework of simple commodity economy inevitably changes this possibility into a reality.

   It is thus that capitalist economy develops and increases simultaneously the possibilities of the very crises.

" The developed contradictions within commodity circulation and further within money circulation (and thereby the possibilities of crises) reproduce themselves by themselves in capital, in which, indeed, developed commodity circulation and money circulation take place only on the basis of capital." (Ibid., p. 286.)

   Indeed, when a severance takes place between purchase and sale in simple commodity economy, such severance will be limited to a narrow market sphere and will not spread generally.

   But the case is different under capitalism. Capitalism which also transforms labour-power into a commodity leads thereby to a general development of commodity and money economy. Capitalism develops a colossal concentration of production which it conglomerates into large and narrowly specialised enterprises. This is why all the independent economic units (split up under capitalism, by private property and a far-going division of labour) are closely tied up with each other so that any one of these economic units is dependent upon all the rest. A textile enterprise depends upon a cotton plantation and a machine factory, the machine factory depends upon the blast furnace work, the blast furnace work upon the collieries, etc., and vice-versa. This is why the general or abstract (as Marx called it) possibility of a crisis, which is contained in the contradiction between purchase and sale, may easily become converted into a reality.

   Further, as credit as well as interchangeable debts and obligations widely develop and are closely intermingled in each other under capitalist production, Marx remarks:

" As far as concerns the possibility of crisis, arising from the form of money as a means of payment, the basis for the realisation of this possibility shows itself to be much more real in capital." (Ibid., p. 284.)

   Consequently, the possibilities of crises, which are already contained in the framework of simple commodity circulation, are reproduced and developed.

" in which the possibility may develop into a reality." (Marx, Ibid., p. 285.)

B. The Inevitability of Capitalist Crises

   But why does the possibility of crises develop into an inevitability under capitalism?

    But why does a severance of necessity set in at definite periods between use-value and value, commodity and money, production and circulation, purchase and sale, capital and labour?

    We have already said that capitalist crises are crises of over-production. But this is only a description of the visible course of modern crises. What has to be explained is why under capitalism over-production inevitably sets in at definite periods of time.

(a) THE CONTRADICTION BETWEEN THE SOCIAL CHARACTER OF PRODUCTION AND THE CAPITALIST FORM OF APPROPRIATION AS THE CHIEF CAUSE OF THE CRISES

    Marx, who considered the crises as an expression of the violent collision between the mutual contradiction of the productive forces and capitalist productive relations, evolved the necessity of crises from the CHIEF CONTRADICTION of capitalism, the contradiction between the social character of production and the capitalist-form of appropriation.

   Private appropriation exists in simple commodity economy; but here the independent commodity producer appropriates the product of his own labour. Under capitalism, however, the owner of the means of production appropriates products which have been exclusively made by the labour of others.

    What does the socialisation of labour under capitalism consist in? It

"does not at all consist in the fact that persons work in one factory (this is only a small part of the process), but in this, that the concentration of capital is accompanied by a specialisation of social labour, by a decrease in the number of capitalists in every industry and an increase in the number of special industries ; it consists in this also, that the many scattered production processes flow into one social production process." (Lenin, What are the Friends of the People? 1894, Collected Works, Vol. I.)

But

" An irreconcilable antagonism between the form of production and that of appropriation begins when the entire production flows, in this manner into one social productive process, while each production is run by an individual capitalist on the arbitrary will of whom it depends, and the social product of which becomes his private property." (Ibid.)

   There are no limits to the desire for the appropriation of the labour of others; it is infinite in its nature. Not

" the profit on any single transaction," but " the restless never-ending process of profit-making alone is what he (the capitalist) aims at." (Marx, Capital, Vol. I.)

   In the investigation of the transformation of money into capital Marx points out that " the circulation of capital has ... no limits." (Marx, Capital, Vol. I.)

   In the struggle for the increase in the appropriated product of the labour of others, every individual capitalist strives for accumulation, i.e., the transformation of surplus-value into capital by increasing and extending his production. The boundless development of production becomes, owing to competition, a matter of compulsion for every individual employer, as under the conditions of relentless competitive struggle every falling behind involves defeat and ruin. The consequence of this tendency towards development of the productive forces under capitalism is that production overflows the bounds formed by the capitalist productive relations.

   It is not demand but capital which determines the limits of the extension of the entire social production.

" With the development of capitalist production, the scale of production becomes less and less dependent on the immediate demand for the product and falls more and more under the determining influence of the amount of capital available in the hands of the individual capitalist, of the instinct for the creation of more value inherent in capital, of the need for the continuity and expansion of its processes of production." (Marx, Capital, Vol. II, Amer. Edn.)

    And owing to the requirements of competition the development of the productive forces does not only proceed by an increase in the purely quantitative scope of the productive apparatus but also an enormous qualitative progress of technique, i.e., by a rise in the productivity of social labour.

   The hunt after increased profits stimulates the development of technique under capitalism, it leads to unceasing and uninterrupted technical improvements and perfections, and gives thereby the growth of the productivity of social labour a tremendous fillip.

" The capitalist mode of production has a tendency to develop the productive forces absolutely ... regardless of the social conditions under which capitalist production takes place." (Marx, Vol. III, p. 292.)
"The mass of this surplus production is capital itself, the existing scale of productive conditions and the boundless enrichment and capitalisation drive of the capitalists, in no way of consumption." (Marx, Theories on Surplus-Value, Vol. II, p. 263.)
" It is a frantic struggle, which carries away even the most experienced and phlegmatic; goods are spun, woven, hammered, as if all mankind were to be newly equipped, as though two thousand million new consumers had been discovered in the moon." (Engels, Conditions of the Working Class, p. 84.)

   But the same process which calls forth the irresistible growth of productive forces, relentlessly leads also to the overstepping of the bounds of the capitalist productive relation, which of necessity causes a conflict between the two, a conflict which can only resolve itself in a crisis.

   Capitalism, which brings with it the socialisation of labour, while the gigantic results of production, which, under capitalism, are not socialised but which are appropriated and utilised by the owner of the means of production, excludes, on the other hand, the use of these productive forces by the mass of the population.

   What, indeed, takes place at the other pole of development, what happens in the camp of the working population ?

    The hunt after profit leads to technical perfections, but simultaneously also to a relative decline in the demand for labour-power -- to the formation of an industrial reserve army.

" The demand for labour decreases to the extent to which capital makes the worker more productive and in proportion to such productivity." (Marx, Capital, Vol. I.)

    In consequence of this, there is a growth in the absolute magnitude of accumulated capital with, at the same time, a relative decline in the number of workers employed by the capitalists.

    In its hunt after profit, capital develops not only the tendency of a relative decrease in the applied volume of live labour, but also reduces simultaneously wages to a minimum which is facilitated by the pressure of the industrial reserve army on the labour market. Even though capitalism admits of an increase in wages in periods preceding crises, such increase corresponds to a still greater increase in the profit of capital and its accumulation, whereby the growing consumption is accompanied by a still greater expansion of production.

   The capitalists who strive to attain their object (the greatest expansion of their capital) are thus compelled to apply methods, for the realisation of this object, which must inevitably lead to a clash between production developed to a maximum and the narrow basis of consumption. The aim of capitalism, the self-expansion of value, comes in conflict with the means for the realisation of this aim.

    Such is, under capitalism, the conflict between the extension of production and the self-expansion of capital, i.e., between the absolute development of the productive forces and the capitalist form of organisation of social production which hampers this development :

" It is just this extension of production without a corresponding extension of consumption which corresponds also to the historical mission of capitalism and its social structure." (Lenin, Collected Works, Vol. III, Russian Edition, p. 30.)

   The result of the movement of capital consists, therefore, in the inevitable overstepping of the limits which are set to it by the capitalist productive forces. Hence the crises.

   In addition to this, there is the fillip to this movement which is strengthened by the credit system and which furthers the acceleration of the development of the contradictions. The surpassing of production over the bounds set by the bourgeois structure of society, as well as the movement of money (loan) capital, is also furthered by the fact that the low rate of interest during times of boom is one of the motive forces which lead to over-production, since it involves an enhanced rate of profit with the mass of surplus-value remaining the same.

   Finally, bank capital

"places at the disposal of the industrial and commercial capitalist all the available, or even potential, capital of society, so far as it has not been actively invested. . . . This does away with the private character of capital and implies in itself, to that extent, the abolition of capital ... banking and credit thus become the most effective means of driving capitalist production beyond its own boundaries and one of the most potent instruments of crises and swindle." (Marx, Capital, Vol. III, p. 712-13.)

   All levers of capitalist development thus act in the direction of the maximum expansion of production.

   The capitalist

" mode of production acquires an elasticity, a capacity for sudden extension by leaps and bounds that finds no hindrance except in the supply of raw material and in the disposal of the produce." (Marx, Capital, Vol. I, p. 492.)

   Capitalism which furthers the development of the production of raw material and the winning of new markets, creates new species of raw material and transforms entire countries into raw material plantations, but thereby overcomes also the bounds which the production of raw materials had set against it.

   Its development is, however, inevitably again and again disastrously disturbed by the narrow bounds of the limited bourgeois form of production. Since by increasing its immense exploitation of the proletariat, capitalism attains a colossal development of the productive forces and a constantly increasing production of the means of production and consumption. This progressively growing mountain of means for human production and consumption are produced in the specific form of commodities, which had attained an enormous volume and a colossal mass of value, and surplus-value contained within it, can only be handed over for consumption if buyers can be found, i.e., the mass of commodities must be sold.

" The labourer has been none the less exploited, but his exploitation does not realise as much for the capitalist." (Marx, Capital, Vol. III, p. 286.)

   This contradiction between unlimited exploitation under capitalism and the limited possibilities of realisation of the results of this exploitation finds its sharpest expression in the crises.

" The conditions of direct exploitation and those of the realisation of surplus-value are not identical. They are separated logically as well as by time and space. The first are only limited by the productive power of society, the last by the proportional relation of the various lines of production and by the consuming power of society. This last named power is not determined either by the absolute productive power nor by the absolute consuming power of society, but by the consuming power based on antagonistic conditions of distribution which reduces the consumption of the great mass of the population to a variable minimum within more or less narrow limits." (Marx, Capital, Vol. III, p. 286.)

(b) THE CONFLICT AND DISPARITY BETWEEN PRODUCTION AND CONSUMPTION AS AN EXPRESSION OF THE CHIEF CONTRADICTION IN CAPITALISM

   We thus see that the contradiction between the social character of production and the capitalist form of appropriation, which forms the chief cause of the crises, expresses itself in the conflict between production and consumption, capitalism endows the contradiction between production and consumption, which also existed in pre-capitalist societies, a new and peculiar character as a contradiction between labour and capital. The crisis finds its expression in the colossal intensification of this contradiction in the sharp disparity between production and consumption. The contradiction between production and consumption always exists under capitalism. The intensification of this contradiction and its development to the point of explosion is conditioned by the contradiction between socialised production and capitalist appropriation.

   The chief capitalist contradiction between social production and the private form of appropriation does not, however, merely limit itself to the contradiction between production and consumption. It has many forms of manifestation. And just as the Marxian theory does not ignore the significance of the relation between production and consumption, but assigns it, however, a subordinate place, so also it does not exclude the role of the disproportion between the individual branches of production in its analysis of the crises, but considers, however, this disproportion as an expression of the chief contradiction.

   Marx has always stressed the connection between these two moments and expressed the view that both the disproportion and the contradiction between production and consumption are only different expressions of one and the same chief contradiction of capitalism, and that they are mutually inter-dependent.

   The entire capitalist production is divisible in two groups: the production of the means of production and the production of the means of consumption. The first group produces iron, steel, machinery and other means of production ; the second group consists of industries which produce textile goods, clothing, means of subsistence and other articles of consumption. Both groups form an inner unity and one cannot exist without the other. Externally, however, they are separated and independent of one another under the capitalist conditions of private property. And it is this separation of the two component parts of the unified social production which involves the possibility of a disproportion, which, in consequence of the contradiction between the social character of production and the capitalist mode of appropriation, transforms by fits and starts this possibility into a necessity.

   The entire value produced in a capitalist society is divided, from a social standpoint, into two parts: one part is realised as capital and serves as productive consumption, and the other part is realised as revenue and serves as tile personal consumption of the capitalists and the workers.

   The commodities of the branches of economy which produce the means of production, can, in consequence of the natural form of their products, only be utilised for the reproduction of constant capital. Thus, for instance, machines cannot be consumed but can only be used up in production; they, therefore, function as capital and can only, therefore, be exchanged for capital, while the products of the branches of production which produce the means of consumption can only be exchanged against income. Thus, for instance, cloth, clothing, means of subsistence and other goods which are produced in the branches of economy manufacturing the means of consumption, can, in consequence of their natural form, only be applied for individual but not productive consumption. They cannot, therefore, from a social standpoint, serve as capital but only as articles of personal consumption. They replace, on one hand, the variable capital, and form on the other hand the unproductive used up, i.e. the consumed, portion of surplus-value. Lenin elucidates this in the following way:

" The products which replace the variable capital must after all be exchanged for the means of consumption of the workers and cover the usual consumption of the workers. The products which replace the constant capital must after all be exchanged for means of production and must be used as capital for new production." (Lenin, Collected Works, Vol. II, p. 495, Russian Edition.)

   And so, the contradiction between production and consumption inherent in capitalism, which assumes the character of a contradiction between capital and income, expresses itself also in the differences of the parts of the social production. This is why, as Lenin remarks :

" The power of consumption of society and the proportionality between the various branches of production are not at all some kind of independent conditions not connected with one another (this, as we have seen, is exactly what the Social-Democrats cannot grasp,-Editor). On the contrary, a certain state of consumption is one of the elements of proportionality." (Lenin, Remark on the theory of markets, Collected Works, Vol. II.)

   While the contradiction between the social character of production and the capitalist form of appropriation expresses itself in the fact that production outstrips consumption, and that the increase in income lags behind the growth of capital, the unequal development of the two parts of the entire social production, and namely, the more rapid extension of the production of the means of production as compared with the production of the means of consumption, is another expression of this contradiction. Just as the chief contradiction of capitalism presupposes the necessity of violent collisions between production and consumption, which find their expression in crises, so exactly does the unequal development of the branches of production lead to a conflict, and indeed, of so profound a nature, that an adjustment is impossible otherwise than through crises.

   One of the characteristic peculiarities of capitalist development is the relative reduction in the amount of human labour (of the workers) as compared with inanimate labour (that of machines). This finds its expression in the progressive growth of constant capital as compared with variable, which latter determines the magnitude of the income of the workers.

   Capital, on the other hand, flows more and more into the branches of production, which, in consequence of the natural form of their product, are determined in advance to serve as constant capital, i.e., in branches of economy which provide means of production. The more the development of capitalism progresses, the more does capital concentrate itself in THOSE branches of production which produce coal, iron and machinery, as compared with those which produce textile goods, food, etc.

" The capitalist law of development consists in the fact that constant capital grows more rapidly than variable, i.e., that an ever greater portion of the newly formed capitals are applied in those branches of social economy which produce means of production. This portion consequently grows more quickly than that producing means of consumption." (Lenin, Collected Works, Vol. II, p. 400.)

    This growth of the branches of economy producing the means of production, which outstrip the development of those producing means of consumption, is another expression of the preponderance in the development of constant capital over variable. Hence the development of the contradiction between production and consumption under capitalism, which finds its expression, above all, in the contradiction between labour and capital and the disproportional development of the various branches of economy of capitalist social production.

   The Marxian theory proceeds from this, that production under capitalism creates within certain limits its own market. In so far as the greatest part of the value is not consumed by the capitalists but is applied towards accumulation, i.e., for the further extension of the process of production, the market for means of production is thereby broadened, while the growth of the industries in which they are produced, leads to the utilisation of fresh labour-power and to an additional demand for means of consumption as a result of increased consumption. Capitalist production, therefore, itself determines consumption : but here consumption is inevitably outstripped by production.

    But just as production develops with relative independence from consumption, so also do the branches of production which manufacture the means of production develop with relative independence from those producing means of consumption while the influence of the former determines the development of the latter.

   But if the means-of-production-group develops relatively independently from the means-of-consumption-group, this does not at all mean that there are no contradictions between them. On the contrary, contradictions are here inevitable and constantly exist.

    But the relatively independent manufacture of the means of production, which within certain limits create their own market, are after all tied up with the production of the means of consumption. Since the machines are not produced for their own sake but in order to increase the production of textile goods, food, etc. Just as the unlimited development of production under capitalism comes into conflict with the lagging consumption, so does the more rapid growth of the means of production finally lead to over-production, as an expression of the disproportion between the various branches of production which go so far that only a crisis may temporarily close up the gap.

    The more rapid growth of production of the means of production as compared with the production of the means of consumption is only a sign that consumption lags behind the development of production under capitalism and of the developing contradiction between capital and income, i.e., between the increase of wealth at one pole and of poverty at the other.

    The contradiction between the social character of production and capitalist form of appropriation thus finds its expression in the fact that the growth of the branches of economy for the production of the means of production outstrips the growth in the production of the means of consumption. This expanding development of the branches of economy which provide the means of production and their outstripping of the production of articles of necessity is, however, possible only within certain limits, in so far as the group of the means of production consummates exchange within itself and creates its own market.

   The increase in the production of the means of production affects, in the long run, also the production of the industries which manufacture the means of consumption, inasmuch as it calls forth a rise in the production of the latter.

    It is thus that the chief contradiction of capitalism calls crises into being, inasmuch as it deepens the contradiction between production and consumption, and creates sharp disparity between the branches of economy, producing the means of production and those which produce the means of consumption.

   The Marxian crises theory stands thus in blunt contradiction to all bourgeois crises theories and to its varieties -- the Social Democratic theories.

   While the bourgeois and Social-Democratic theoreticians, in their investigation of the problem of crises, are using their efforts to deny the inner contradictions of the capitalist mode of production, to abstract themselves from them, to " forget " them or to represent them as an accidental error in calculation which may be overcome within the framework of capitalism, Marx finds that the crises spring from the essence of capitalism itself, from the contradiction between the social character of production and capitalist appropriation which is inherent in capitalism. The capitalist MODE OF PRODUCTION is itself the cause of the general over-production crises. So long as this mode of production exists, so long will crises be inevitable and impossible to overcome. The capitalist PRODUCTIVE RELATIONS must be removed if it be really desired to put an end to crises. . . .

C. Periodicity of Crises

   Capitalist production develops in cycles, which means that it moves in a constant circle (cycle) of phases (crisis, depression, trade revival, boom, crisis, and so on), which follow on and merge with each other.

   Among the other things of which Marx is accused by bourgeois economists is that, as they maintain, he dragged into far too great prominence and in a onesided and biassed manner when elaborating his theory of crises, only one single phase of that cycle -- to wit, the crisis-whilst he disregarded its other phases. Yet bourgeois economists themselves usually set up a cyclical theory, or theory of good and bad trade periods, in place of the theory of crises. They do not regard crisis as the outstanding feature of the cycle of capitalist production, seeing in it, instead, a passing phase of the cycle which exists together with its other phases, thus merging the crisis with the cycle and in the changing aspects of advancing periods of good trade.

    Unlike them, Marx laid particular emphasis on crisis since it is the decisive feature of the trade cycle and determines the character of the movement undergone by all capitalist production.

    For this reason the Marxian theory of trade cycles is primarily a theory of crises, because its most noteworthy feature is that capitalist production is periodically shaken by crises. Crises are the connecting points of the main contradictions of capitalism.

    The Marxian theory of crises does not, however, ignore either depression or good-trade periods. Rather the reverse ; for regarding crises as the all-decisive and central feature of the trade cycle Marx thereby furnishes the only scientific explanation for the other phases of the cycle.

    According to Marx, crises are " always only momentary and violent solutions of existing contradictions." (Marx, Capital, Vol. iii.)

   Crises are the temporary forceful solution to the contradictions upon which capitalism is based and which determines its development. By dislocating the forces of production (through depreciation of capital, fall in prices, destruction of commodities, and reduction of output), and limiting production the crisis again brings capitalist production, for a brief space, into accord with the narrow foundation of consumption on which it rests. It is in this, then -- in the temporary and forcible solution of accumulated contradictions -- that the function of crisis lies.

   It is perfectly plain, therefore, that under conditions of a developing capitalism there can be no uninterrupted, permanent crises because in its crises a temporary solution of its contradictions is achieved.

" There are no permanent crises." (Marx, Theories of surplus Value, Vol. ii, Part 2, p. 269, Note i, Stuttgart, 1921.)

   If it were not so, crises would not play the part in the trade cycle that they do in solving the contradictions of the system. Following on the solution of these contradictions as the result of crisis, capitalist production starts moving again. A crisis fails, however, to eliminate these contradictions -- it merely resolves them for the time being. It is for this reason that any further development of production after a crisis can only take place in the direction of a fresh heaping up, as it were, of the contradictions which have not been eliminated. In its movement, then, capitalist production is inevitably bound to be brought up short again and again by its own narrow limits, for:

" In the very nature of capitalist production we have production without regard to the limits of the market." (Ibid., p. 301.)

    Since crisis does not do away with the contradictions between the social character of production and the private-capitalist nature of its appropriation -- that is, it does not remove the chief cause of crises -- sooner or later the movement of capitalist production must once more lead to crisis.

   In this way the crises become periodical crises. The same causes which make for the appearance of crises also bring about their periodic recurrence. For the time being the crisis solves the accumulated contradictions and thereby makes it possible for production to continue developing, i.e. for an advance to take place which must again be inevitably closed by a crisis, and so it goes on.

" Just as heavenly bodies once hurled into a definite movement continually repeat that same movement, so, too, does social production act as soon as it is once thrown into that movement of changing expansion and contraction: effects become causes, and the changes of the whole process, which constantly reproduces its own conditions, acquire the form of periodicity." (Marx, Capital, Vol. i, p. 356.)

   Of particular importance for the cyclical course of capitalist production is the manner in which the renewal of fixed capital is effected. Unlike circulating capital (the value of the raw materials and the variable capital), which flows back to the capitalist upon each completed revolution, fixed capital (machinery, buildings, etc.) only wears out gradually. Its value returns gradually in small sums of money to the capitalist (amortisation, writing off of capital for wear and tear). But this fixed capital is renewed all at once by a single investment of large capital values in the industry concerned. This method of renewing fixed capital, the gradual, partial diminution and the sudden isolated reinflux of this capital in great volume into production bring about a sudden advance in the demand for means of production, building materials, iron, machinery, etc. The market for branches of industry which furnish the means of production expands, production also rising simultaneously in these branches of industry.

    Replacement of fixed capital seldom occurs as the result only of any actual technical wear and tear. In most cases what happens is that the old means of production are replaced by new, not because they have been completely worn out but because new and better means of production have been invented, so that the use of the old means of production would be a handicap on the competitive power of the given plant.

   It is perfectly clear, of course, that a large number of inventions and improvements occurs just at times of crisis and depression, as it is at such times of all others that competition between the capitalists is fiercest. To avoid losses or to check the fall in profits in the case of any drop in prices the capitalists lower their costs of production, this being done in two ways: first, by cutting wages and intensifying labour; and secondly, by perfecting the old and introducing new improved machinery, i.e. by renewing their fixed capital.

   Concerning this point Marx writes in the second volume of Capital:

" The development of fixed capital ... is ... shortened by the continuous revolution of the instruments of production, which likewise increases incessantly with the development of capitalist production. This implies a change in the instruments of production and the necessity of continuous replacement on account of virtual wear and tear, long before they are worn out physically. . . . A crisis is always the starting point of a large amount of new investments." (Marx, Capital, Vol. ii, p. 130.)

   So it comes that, out of the crisis which destroys part of the forces of production and in this way resolves the contradictions accumulated during the period of " good trade," the conditions emerge which necessitate fresh and large investments of capital. In other words, the crisis itself forms the starting point for a fresh advance. As is common knowledge, an advance of this kind begins in those branches of industry producing the means of production, i.e. in the heavy industries. In such case it is a matter of indifference whence this demand for new means of production emanates -- whether from the branches of industry furnishing the means of production or from those supplying the means of consumption. If the crisis does happen to affect all branches of production (as is the case with any general over-production), and a bitter competitive struggle is everywhere going on, with prices falling, and so on, the result, however, is that in all branches of industry the ground is being prepared for a " premature renewal of industrial equipment."

    The branches furnishing the means of production form the chief branches of industry through which all social production is influenced as far as its general trend is concerned. The movement towards " better trade " which begins in these branches of production is also bound to change gradually into an advance involving all branches of production.

    The rising tendency of the sections of industry which furnish such means of production extends as well to the sections producing the means of consumption, because the expansion of the former involves an increase in the number of workers employed. Then again, the revival in those lines of production manufacturing the means of consumption strengthens the expansion of the branches of industry engaged in turning out the means of production, as the industrial branches producing the means of consumption likewise effect improvements, take steps to renew their fixed capital on as big a scale as possible and place orders for large quantities of machinery and other equipment with those branches working on the manufacture of the means of production. The advance towards " better trade " blossoms into full flower. The branches supplying the means of production now fail to cope with the steadily increasing inflow of orders coming from that section of capitalist industry enjoying boom trade conditions until over-production suddenly makes itself felt and leads to a cancelling of such orders and the slowing down of new building schemes-until, in other words, a new crisis breaks out.

   And so the whole process is being continually repeated all over again.

   In this way the method adopted for renewing fixed capital forms the material basis for the periodicity of crises; since, concurrently with the development of capitalism and its concentration and centralisation, there is also an increase in the volume of fixed capital. Every crisis sweeps along on a broader basis than its predecessor and must exert an ever-more destructive effect. The greater the volume of the social means of production and the more concentrated capital is, the sharper, too, must be the contradictions between the social character of production and private appropriation. Hence it follows that with the further development of capitalism the intervals between crises become not longer but shorter; that is to say, that crises are not rarer in appearance but break out oftener. Up to the 'nineties of the last century crises recurred on the average every ten years ; later the interval between them dropped to between seven and eight years.

    Marx worked out his theory of crises before capitalism had entered its highest stage of monopoly. All opponents of Marx, though chiefly the Social-Democrat theoreticians, see in this a convenient excuse to bolster up the objection that while the Marxian theory of crises might have been right for pre-monopoly capitalism, it is inapplicable to the monopoly, and more especially the " organised," capitalism of after the war. Actually, monopoly capitalism utterly fails to disprove Marx's theory of crises ; rather the reverse, it confirms it up to the hilt. An irrefutable proof of the soundness of the Marxian theory of crises is to be seen in the crisis which broke out over four years ago and is the worst of all the crises known in the whole history of capitalism.

1. Why are crises bound to recur periodically under capitalism ?
2. Why do these crises become increasingly destructive ?
3. Why does the development of capitalism lead to ever shorter intervals between crises ?