Draft On The Marxist Theory Of Capitalist Crisis [A] While interpreting Marxs theory about the inevitable and

insoluble capitalist crisis the Marxist-Leninist intellectuals are generally prone to focus on three phenomena and to ascribe one among the three as the fundamental cause behind the capitalist crisis. The three phenomena are:-- (1) Underconsumption of the masses; (2) Over-production; (3) The tendency of the rate of profit to fall. But a close reading of Marxs Capital reveals that he has not allotted any separate and exclusive space for the discussion on capitalist crisis; on the other hand, he has repeatedly brought forward this issue in the course of his analysis about the various aspects of the objective inner dynamics of the capitalist productive process and he has never characterized any one of the various manifestations, reflections or outcomes of the inherent dynamics of capitalism as the main or fundamental cause of capitalist crisis.. According to him, the fundamental cause of the crisis is inherent in the totality of the capitalist process. But this does not mean that the above three phenomena have never found prominent places in Marxs discussion about capitalist crisis. Rather it can be seen that in the course of his analysis about the inherent contradictions of capitalism these three factors along with some other factors have been included in the analysis that has reflected a totality. Marxs analysis about capitalist crisis is spread over the whole of his Capital, more especially over its third volume. In this respect we must keep in mind that Marx has categorically rejected the first factor as a theory of crisis. Ridiculing the contemporary bourgeois economists like Rodbertus who were the representatives of this theory at that time as gentlemen of simple common sense, Marx had written in the second volume of Capital :-- To say that the crisis comes from the absence of consumption in the conditions of pay, of the deficiency of solvent consumers, is to incur in a full tautology. The capitalist system only knows consumers who can pay, except sub forma pauperis (paupers of the indigents) or one of the rouges. That the goods are unsaleable means only that it has not found buyers who can pay them and therefore consumers (because the goods in fact are bought to consume individually or collectively). But it wants to give the tautology an appearance of profound fundamentation by saying that saying that the working class receives a very little part of his proper product and therefore the wrong would be remedied if he receives a bigger part of that product or if his salary increases. But it will be enough to observe that invariably the crises are prepared by a period when the salary increases in a general way and the working class gets really a bigger part of the product destined for consumption. From the point of view of these gentlemen of simple common sense, these periods, on the contrary, would must conjure the crisis. It appears, indeed, that the capitalist production implicates conditions that do not depend on the good or bad will, conditions that only tolerate momentarily the relative prosperity of the working class, and always in the capacity of bird of storms, announcer of the crisis. In Anti-Duhring Engels

had also written:-- The under consumption of masses is not a new phenomenon. It has existed, as long as there have been exploiting and exploited classes whilethe general shrinkage of the market which breaks out in crisis as a result of surplus production is a phenomenon only of the last 50 years. Although Marx had rejected the theory of under consumption as the theory of the capitalist crisis, he had stressed on this factor a number of times in the course of his analysis about the inherent contradiction of the capitalist production process. But this factor had not found a separate place in the Marxs analysis of the capitalist crisis, but had been included as a part of the totality. In this context it is worthwhile to bring to notice a particular assertion of Marx wherein he had expressed: -- The worker only can buy, incorporate to the demand in relation to the goods that enter in the individual consumption, because he does not value his work or get personally the conditions of his realization, the work means and the material to work. This eliminates the bigger part of the producers (the workers there where the acquired its capitalist development) as consumers, as buyers. The workers do not buy primary matters, nor work means, they buy only living means (goods which enter directly in the individual consumption). Therefore it is ridiculous to speak about identity between the producers and consumers, because in a big amount extraordinarily big of businessthose do not devote themselves to the articles of consumptionthe immense majority that intervene in the consumption of production are absolutely marginalized to buy the product produced by themselves. They are not direct consumers nor buyers of this big part of goods in which production they intervene as salaried. The prominent place given by Marx to the factor of over-production in his analysis of the capitalist crisis has been widely discussed in the MarxistLeninist circle. In the section entitled Accumulation of Capital & Crisis of Theories Of Surplus-Value Marx had written that: --The condition of overproduction is the general law of production of capital: production proceeds in accordance with the productive forces.. and disregarding the existing limits of the market, effective demand besides, the mass of producers is limited and , because of the nature of capitalist production, must always remain limited.. In Anti-Duhring Engels also characterized the capitalist crisis as the crisis of overproduction. But to grasp Marxs theory about capitalist crisis we feel that it is essential to concentrate on Marxs discussion about the tendency of rate of the profit to fall, because in that discussion he had tackled the question in its totality. Before going into the discussion it should be pointed out that apart from the above three factors Marx had discussed about three other factors as very important constituents of the inherent contradictions in the dialectics of capitalism. These are:--(a) the contradiction between use-value and exchange-value where the exchangevalue has a tendency to nullify use-value in its bid to dominate; (b) the separation between the creation of surplus-value and its realization, both in respect of time and space which disturbs the intimate connection between the creation and realization of surplus-value and thus creates the possibility of the

surplus- value remaining unrealized; (c) the separation between production, circulation and accumulation which forces the three processes to move almost as autonomous processes and creates the possibility of disruption of balance between the three processes which are, in reality, intimately inter-connected. Now let us move into the question of the tendency of the rate of profit to fall. We must remember that the rate of surplus value and the rate of profit are two different things. The rate of surplus value is s/v where s= surplus value and v= variable capital whereas the rate of profit is s/C where C= total capital and as such = c+v where c= constant capital; so the rate of profit is s/c+v. According to Marx Now we have seen that it is a law of capitalist production that its development is attended by a relative decrease of variable in relation to the constant capital, and consequently to the total capital set in motion. This continual relative decrease of the variable capital vis-a vis the constant capital and consequently the total capital, is identical with the progressively higher organic composition of the social capital in its average. It is likewise just another expression for the progressive development of the social productivity of labour, which is precisely demonstrated by the fact that the same number of labourers, in the same time, i.e. with less labour, convert an ever- increasing quantity of raw and auxiliary materials into products, thanks to the growing application of machinery and fixed capital in generalEvery individual product, considered by itself, contains a smaller quantity of labour than it did on a lower level of production, where the capital invested in wages occupies a far greater place compared to the capital invested in the means of production.The immediate result of this is that the rate of surplus value, at the same, or even a rising, degree of labour exploitation, is represented by a continually falling general rate of profitThe progressive tendency of the general rate of profit to fall is, therefore, just an expression, peculiar to the capitalist mode of production, of the progressive development of the social productivity of labour. [Capital, Vol. 3]. What is the result of this process? Thus the same development of the social productiveness of labour expresses itself with the progress of capitalist production on the one hand in a tendency of the rate of profit to fall progressively and on the other, in a progressive growth of the absolute mass of the appropriated surplus value, or profit; so that a relative decrease of variable capital and profit is accompanied by an absolute increase of both. This two-fold effect can express itself only in a growth of the total capital at a pace more than that at which the rate of profit falls. For an absolutely increased variable capital to be employed in a capital of higher composition, one in which the constant capital has increased relatively more, he total capital must not only grow proportionately to its higher composition, but still more rapidly. It follows, then, that as the capitalist mode of production develops, an ever-increasing larger quantity of capital is required to employ the same, let alone be increased, amount of labour-power. If the variable capital forms just 1/6 of the total capital instead of the former , the total capital must be trebled to employ the same amount of labour-power. And if twice as much labour- power is to be employed, the total capital must increase six-fold. [Capital, Vol. 3]. This is

the contradiction that the tendency of the rate of profit to fall creates. Elaborating on this point Marx wrote A fall in the rate of profit and accelerated accumulation are different expressions of the same process only in so far as both reflect the development of productiveness. Accumulation, in turn, hastens the fall of the rate of profit, in as much as it implies concentration of labour on a large scale and thus a higher composition of capital. On the other hand, a fall in the rate of profit again hastens the concentration of capital and its centralization through expropriation of minor capitalists. This accelerates accumulation with regard to the mass, although the rate of accumulation falls with the rate of profit. On the other hand, the rate of self-expansion of the total capital or the rate of profit, being the goal of capitalist production (just as self-expansion of capital is its only purpose), its fall checks the formation of new independent capitals and thus appears as a threat to the development of the capitalist mode of production process. It breeds over- production, speculation, crisis and surpluscapital and alongside surplus population. [Capital, Vol. 3]. In the same book he had written further that If the rate of profit falls, then follows, on the one hand, an exertion of capital in order that the individual capitalists, through improved methods, etc. may depress the value of their individual commodity below the social average value and thereby realize an extra profit at the prevailing market price. On the other hand, there appears swindling and a general promotion of swindling by recourse to frenzied ventures with new methods of production, new investment of capital, new adventures, all for the sake of securing an extra profit, which is independent of the general average and rises above it. The rate of profit, i.e. the relative increment of capital, is above all important to all new offshoots of capital seeking to find an independent place for themselves. And as soon as formation of capital were to fall in the hands of a few established big capitals, for which the mass of profits compensates for the falling rate of profit, the vital flame of production would altogether be extinguished. The rate of profit is the motive power of capitalist production. [Capital, Vol.3] It is quite clear from the above quotations that, to Marx, the falling rate of profit is a very vital factor behind the capitalist crisis. At the same time in his exposition about the falling rate of profit Marx had not concentrated only on this particular factor, but had deemed it essential to extend the discussion to include other important factors and to show the interconnection between these factors. As for example, while discussing about the falling rate of profit Marx had written: -- As soon as all the surplus-labour it was possible to squeeze out has been embodied in commodities, surplus-value has been produced. But this production of surplus value completes but the first act of the capitalist process of productionthe direct production process. Capital has absorbed so and so much unpaid labour. With the development of the process, which expresses itself in the drop of profit, the mass of surplus value thus produced swells to immense dimensions. Now come the second act of the process. The entire mass of commodities, i.e. the total product, including the portion that

replaces the constant and variable capital, and that representing the surplus value must be sold. If this is not done, or done only in parts, or only at price below the prices of production, the labour has indeed been exploited, but his exploitation is not realized as such for the capitalist, and this can be bound up with a total or partial failure to realize the surplus value pressed out of him, indeed with the partial or total loss of capital. The conditions of direct exploitation and those of realizing it are not identical. They diverge not only in place and time, but also logically. The first are only limited by the productive power of the society, the latter by the proportional relation of the various branches of production and the consumer power of the society. But the last named is not determined either by the absolute productive power, or, by the absolute consumer power, but by the consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of the society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce the surplus value on an extended scale. This is a law for capitalist production imposed by incessant revolutions in the method of production themselves, by the depreciation of existing capital always bound with them, by the general competitive struggle and the need to improve production and expand its scale merely as a means of self-preservation and under penalty of ruin. The market must, therefore, be continually extended, so that its inter-relations and the conditions regulating them assume more and more the form of a natural law working independently of the producer and become even more uncontrollable. This internal contradiction seeks to resolve itself through expansion of the outlaying field of production. But the more productiveness develops. The more it finds itself at variance with the narrow basis on which the conditions of consumption rest. It is no contradiction at all on this self-contradictory basis that there should be an excess of capital simultaneously with q growing surplus of population. For while a combination of these two would, indeed, increase the mass of produced surplus value, it would at the same time intensify the contradiction between the conditions under which the surplus value is produced and those under which it is realized. [Capital, Vol.3] In the above quoted passage we can see that Marx has brought out the interconnection between the falling rate of profit, overproduction and the factor of under-consumption of the masses. He has started from the falling rate of profit and then proceeded to show how this falling rate of profit induces overproduction and how this overproduction is related to the factor of the lack of consumption power of the masses--- because this overproduction is diagnosed not with respect to the requirements of the society, but with respect to the requirements of the existing market, to the capacity of the market to absorb all the commodities produced, to the possibility of all the commodities produced to be sold, to the dichotomy between the realization, in the market, of the surplus values and their creation in the factories. But he has not pinpointed any single factor or contradiction as the main or fundamental cause operating behind the capitalist crisis. He has just explained a process in which

all the factors are inter-connected and which intensifies the contradiction between the conditions under which the surplus value is produced and those under which it is realized. [B] Now we will point to a crucial analysis of Marx, which, we think, is fundamental to the understanding of Marxs theory of crisis. In the ChapterXV of Capital, Vol.3 entitled Extension Of The Internal Contradiction Of The Law (of the tendency of falling profits) there is a section with the subtitle Conflict Between Expansion of Production & Production of SurplusValue. In that section, while analyzing the contradiction reflected in the conflict between the expansion of production and production of surplus value, Marx wrote that-The contradiction, to put in a very general way, consists in that the capitalist mode of production involves a tendency towards absolute development of the productive forces, regardless of the value and surplus value it contains, and regardless of the social conditions under which capitalist production takes place, while, on the other hand, its aim is to preserve the value of the existing capital and promote its self-expansion to the highest limit(i.e. to promote an ever more rapid growth of this value). The specific feature about it is that it uses the existing value of capital as a means of increasing the value to the utmost. The method by which it accomplishes this include the fall of profit, depreciation of existing capital and development of the productive forces of labour at the expense of already created productive forces. The periodic depreciation of existing capitalone of the means immanent in capitalist production to check the fall of the rate of profit and hasten accumulation of capital-value through of new capitaldisturbs the given conditions, within which the process of circulation and reproduction of capital takes place and is therefore accompanied by sudden stoppages and crises in the productive process. The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and purpose of production; that production is only production for capital and not vice versa, the means of production are not mere means for a constant expansion of the living process of the society of producers The limits within which the preservation and self-expansion of the value of the capital resting on the expropriation and pauperization of the great mass of producers can alone move--- these limits come continually into conflict with the method of production employed by capital for its purpose, which drives towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. The meansunconditional development of the productive forces of the society comes continually into conflict with the limited purpose, the self-expansion of the existing capital. The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world-market and is, at the same time, a continual conflict

between its historical task and its own corresponding relations of social production. [Capital, Vol.3] Here we get Marxs analysis about the fundamental cause which gives rise to the inevitable and insoluble crisis of capitalism. Capitalism creates the possibility of unlimited production, but its aim is limited to extraction and realization of surplus value, to production and accumulation of capital. The conflict between the former and the latter creates barrier before the development of capitalist production, inevitably gives birth to crises. In the same chapter under the section with the title Excess Capital And Excess Population we find the following comment of Marx: --Development of the productive forces of social labour is the historical task and justification of capital. [Capital, Vol.3] The continual contradiction between this historical task of capitalism and its limited aim or purpose inevitably drags capitalism into the whirlpool of periodic crises. Overproduction of commodities and capital, the tendency of falling rate of profit, the contradiction between the use-value and exchange-value, the disruption of the balance between production, circulation and accumulation etc. are the various phenomena through which this main contradiction asserts itself. [C] Now what, according to Marx, is crisis or what phenomenon Marx has characterized as crisis? The enquiry into this question is highly important at the present juncture, as volumes of confusion have been created in the Marxist- Leninist circle about the definition and characteristics of crisis. In Capital, Vol.3, we find a number of categorical assertions of Marx about crisis that leaves no doubts, whatsoever, regarding his definition of crisis. The crises are always but momentary and forcible solutions of the existing contradictions. They are violent eruptions which for a time restore disturbed equilibrium. In another instance we find the following analysis of Marx:--The limitations of the capitalist mode of production come to the surface: (1) In that the development of the productivity of labour creates out of the falling rate of profit a law which at a certain point comes into antagonistic conflict with this development and must be overcome through crisis. The above categorical assertions of Marx are enough to bring out the truth that the crises do not indicate the breakdown or near breakdown of the capitalist mode of production or the near fatal disturbance of the balance of the capitalist economic system. On the contrary, through crises the breakdowns or near breakdowns of the capitalist economic system are averted, the disturbed balance is restored and this task is accomplished forcibly, violently. How this is done? Marx was also categorical in this question. He had written that:--How is this conflict settled and the conditions restored which correspond to the sound operation of capitalist production? The mode of settlement is already indicated in the very emergence of the conflict whose settlement is under discussion. It

implies the withdrawal and even the partial destruction of capital amounting to the full value of additional capital, or at least a part of it But the equilibrium would be restored under all circumstances through the withdrawal or even the destruction of more or less capital. This would extend partly to the material substance of capital i.e. a part of the of the means of production, of fixed and circulating capital, would not operate, not act as capital; some of the operating establishments would then be brought to a standstill. Although, in this respect, time attacks and worsens all means of production (except land), the stoppage would in reality cause far greater damage to the means of production. However, the main effect in this case would be that these means of production would be disturbed for a shorter or longer time. [Capital, Vol.3] So the partial withdrawal or even destruction of capital, including means of production, is the forcible and violent way through which the crises temporarily solve the inherent contradiction of capitalist mode of production or restore the balance disturbed in the process of capitalist production. [D] With regard to the forcible and violent character of the path of solution, a special feature, brought into light by Marx, deserves serious attention. Speaking about the forcible and violent way of solution or restoring balance followed during the crises, Marx wrote about the competition among the capitalist: So long as things go well, competition effects an operating fraternity of the capitalist class, as we have seen in the case of the equalization of the general rate of profit, so that each shares in the common loot in proportion to the size of his investment. But as soon as it is no longer is a question of sharing profits, but of sharing losses, everyone tries to reduce his own share to a minimum and to shove it upon another. The class, as such, must inevitably lose. How much the individual capitalist must bear of the loss, i.e. to what extent he must share in it at all, is decided by strength and cunning, and competition then becomes a fight among hostile brothers. The antagonism between each individual capitalists interests and those of the capitalist class as a whole then comes to the surface, just as previously the identity of those interests operated in practice through competition Although as the description of this conflict shows the loss is by no means equally distributed among individual capitals, its distribution being rather decided through a competitive struggle in which the loss is distributed in very different proportions and forms, depending on special advantages or previously captured positions, so that one capital is left unused, another is destroyed, and a third suffers but a relative loss, or is just temporarily depreciated, etc.. [Capital, Vol.3] So Marxs analysis tells us that during the crisis period an antagonism develops between each individual capitalists interests and those of the capitalist class as a whole and that the competition between the individual capitalists becomes antagonistic. This is a very important feature of crisis.

[D] Following Marxs theory of crisis whose salient features have been described above, the following conclusions can be drawn: (1) Crises are not the situations when the bourgeoisie are in complete disarray, hopelessly chained by their own inherent contradictions on the contrary, crises are violent means of temporarily solving the contradiction and this mean is destructive. (2) As crisis is a inherent feature of capitalism, so we can conclude that the capitalisms dynamic has two opposite characteristics inherent in it one, revolutionary, and another, destructive. (3) As crisis will always offer the opportunity to capitalist system to temporarily solve the problem of disturbed balance of the system, so the system will not collapse on its own. (4) As during the crisis period antagonism develops between the interests of the individual capitalists and those of the capitalist class as a whole, so during the crisis period there is every possibility of the emergence of a particular political representative of the capitalist class which while upholding the general interests of the capitalist class will stand against the interests of the individual capitalists and will be able to rally the bulk of the capitalists after restoration of the balance by proving his role as upholder of the interests of the capitalist class as a whole. [ The rise of Hitler may serve as an example in this point.]