STRANGE TIMES

11 Responses to “The marxist theory of crisis”

1. 1 Steve Owens
   January 30, 2011 at 3:33 pm

   Bill
   Simon Clarke is saying to you what I have been trying to say, as Clarke puts it, “The necessity of crisis for Marxism is not the necessity of terminal collapse, it is the permanent necessity of class struggle.”

2. 2 Lupin3
   February 4, 2011 at 2:14 am

   I was disappointed to find no real explanation for a general crisis in Clarke’s writing. Indeed, Marx’s understanding of the dynamics of overproduction are so well established that it is a consensus view of the neo-classical, Austrian, and even the various Keynesian schools, is it not?

   I have some quibbles with the dynamic as Clarke explains it (such as his failure to account for oligarchic monopolization and difficulties in market clearing), but the overall description of the tendency of capital to overproduce seems so solid, so intuitive, in fact, I wonder why more real world examples, and less theoretical language, aren’t employed.

   It does seem that the economic crisis provides an excellent opportunity to discuss economic systems, and the various histories which have lead us to our present understandings. I think pointing out that Say’s Law, as you have done, is at the core of the various disputes between these understandings. Since you’ve suggested that Marx essentially disregarded Say’s Law, and since Marx’s understanding was of capital and hence, supply sided, I wonder if you could provide context of the Marxian view of demand? Did Marx deny that, as in Say, supply creates its own demand? Or does he attempt to refute the entire supply and demand binarism?

   Thanks for an interesting post.

3. 3 Bill Kerr
   February 4, 2011 at 12:19 pm

   Lupin3,

   Thanks for the comment.

   Most of your questions are answered in pp. 93-100 of Clarke’s book. On pp. 99-100, he summarises as follows:

   If we sum up the argument so far, we can say that Marx has established that there is a tendency inherent in the capitalist mode of production to develop the forces of production, under the pressure of competition, without regard to the limits of the market, as every capitalist seeks to increase his profits by introducing new methods of production on an increasing scale. The momentum of the development of production in any branch is not determined by the demand for the product, but by the opportunities for acquiring a surplus profit by advancing the productive forces. The result is that, although the growth of capitalist production at the same time develops the world market, the forces of production develop unevenly and without any reference to the requirements of proportionality, so that competition imposes a constant tendency to the disproportionate development of the various branches of production

   The interaction of supply and demand provides a counter-tendency to the disproportionate development of production, as the overproduction of particular commodities leads to a fall in their price. For political economy the unevenness in the rate of profit leads capital to flow smoothly into the underdeveloped from the overdeveloped branches of production. However, on the one hand the stimulus of profit is not determined by the relation between supply and demand, but by the uneven development of the forces of production, so the former can act only as a counter-tendency to the uneven development of the forces of production. On the other hand, this counter-tendency is only mobilised in the face of the overproduction of particular commodities. Since these commodities have already been produced, the market can only act as a countertendency through the devaluation of commodities and the destruction of productive capacity in the overextended branches of production. The losses incurred by these capitalists leads them to reduce their purchases in turn, so that overproduction is immediately generalised, and capitalists in all branches of production face the prospect of loss. The distinction made by classical political economy between particular and general overproduction is therefore entirely spurious.

   I haven’t read all of Clarke’s book, there may be other sections that relate to your queries, too. But the above sections are a good start.

4. 4 Bill Kerr
   February 5, 2011 at 10:51 pm

   Lupin3

   Marx’s understanding of the dynamics of overproduction are so well established that it is a consensus view of the neo-classical, Austrian, and even the various Keynesian schools, is it not?

   It’s important to obtain a clear idea of what these other schools of thought do say about the causes for crisis. Just to get that ball rolling I’ll quote some things that Clarke says, in his book, about the Austrian and neo-classical schools (leaving Keynes to later). I’m not certain whether these are accurate depictions of the real insider thoughts of these schools or more like juvenile outsiders caricatures but it does provide a basis for further clarification.

   I don’t think its correct that Marx’s views on crisis are either well understood or supported by other schools of thought.

   AUSTRIAN

   The neo-Austrian economists, led by Hayek, insisted that the cycle was a monetary phenomenon, which arose because of the inflationary expansion of credit as banks, encouraged by politicians, issued money unbacked by gold. The strict imposition of the gold standard would ensure stability through the self-regulation of the market. (p. 39)

   NEO-CLASSICAL

   Within neo-classical theory the overall balance of supply and demand is maintained by the interaction of the rate of interest and the rate of profit. If there is a shortfall of investment the demand for investment funds will fall, leading to a decline in the rate of interest which will stimulate renewed investment. A stable monetary policy will ensure that equilibrium is maintained. In the classical world of the gold standard a deficit on the balance of international payments provided the prime indication of overheating, the outflow of gold and currency reserves forcing the monetary authorities to tighten monetary policy to rectify the imbalance. Similarly, the onset of recession led to an inflow to the reserves which permitted a more relaxed monetary policy. In the modern world the indicators of inflationary and deflationary pressures are more complex, but the principle remains the same. A crisis of overaccumulation, such as that which struck at the end of the nineteen eighties, is then the result of lax monetary policies which have stimulated inflationary and speculative over-investment.

   For all their mathematical sophistication, the explanations of crises offered by today’s economists are no different from those that were being put forward at the beginning of the nineteenth century. It was always recognised that a large external shock, such as a war or harvest failure, might precipitate a temporary disruption in the relations between branches of production, or in the international economic relations of the national economy, but the cause of such a crisis lies outside the capitalist system, and it was assumed that stability would soon be restored by the normal processes of market adjustment. Apart from such external shocks, the principal cause of crises was traditionally identified as the discretionary intervention of the government in the regulation of the economy. In particular, if the government sought to stimulate the economy artificially by printing money to finance its excessive spending, it would promote over-investment, which would lead to an inflationary boom. Eventually the boom would collapse as unsound and speculative ventures failed, requiring a period of recession to purge the excesses from the system. The cyclical alternation of boom and bust which has marked the history of capitalism is not, therefore, inherent in the capitalist mode of production, but is the result of the folly and irresponsibility of politicians. (P. 5)

   Clarke also has a fairly detailed ongoing discussion of how various “Marxists” have misinterpreted Marx as a prelude to his own interpretation.

5. 5 Bill Kerr
   February 25, 2011 at 11:47 am

   One of the problems with Marx’s writings is that there are so many difficult pages to read and the theory has become so muddied by the subsequent efforts of “marxists” to interpret what he was saying. This is further compounded by the fact that Marx’s work was not finished. The unfinished Volumes 2 (1885) and 3 (1894) of Capital were published by Engels after Marx died. Theories of Surplus Value (1905) was published by Kautsky after Engels died. Grundrisse (Marx’s originally rough draft which does provide an overview and makes his dialectical method more obvious) was not published until the 1940-50s and an English translation was finally completed in 1973.

   What is more there have been furious disagreements / different interpretations about what Marx was saying ever since – Engels, Kautsky, Bernstein, Luxemberg, Hilferding, Hobson, Lenin etc. etc.

   Given this background it does required something of an heroic effort to sort through it all and come up with an interpretation that has credibility. With this in mind I was impressed by the process that Simon Clarke has gone through at outlined in his book, pp. 12-13:

   These problems mean that any discussion of Marx’s theory of crisis is bound to involve a compromise between exposition, interpretation and contextualisation. In the course of writing this book I have been conscious of the need to try to maintain some balance between these three elements. For the first draft of the manuscript I read through all the relevant works of Marx and Engels to present their discussion of crisis strictly chronologically and contextually, while trying to keep the interpretation to a minimum. I then divided the material into five parts, corresponding to the periodisation of Marx’s work into the early works (up to 1848); the period of re-evaluation after the revolutions of 1848; the foundations of the critique of political economy in the manuscript of 1857–8; the development of the critique of political economy in the manuscripts of 1861–5 (which comprises two chapters in the final version of the book); and the mature works from the first edition of the first volume of Capital. I then re-organised the material in each part thematically, within the framework of an interpretation which I nevertheless tried to root as closely as possible in Marx’s texts, and which I modified in the light of a re-reading of most of the significant texts. Finally, I reworked the whole text, in an attempt to clarify the exposition and set it in the context of an interpretation of Marx’s work as a whole.

   Because of the complexity, lack of time, busy lives etc. we need a guide to understanding Marx’s critique of political economy and crisis. Perhaps Clarke’s book is a pretty good effort in that direction.

6. 6 Lupin3
   February 26, 2011 at 9:47 am

   There are ways in which Clarke’s writing is useful to understanding the theoretical constructions of Marxian economics – his explication of overproduction is reasonably transparent compared to Marx’s writings, for instance. I will purchase Clarke’s book on that basis alone.

   But, contrary to Clarke, there has been an upheaval in explaining capitalist crises, one which has shaken the old views of capital quite literally to their foundations. Now obviously, there’s a reason Keynes isn’t much discussed here; perhaps it is a formal strategy on the basis that Keynes theoretically delays the revolution, or perhaps it’s based on disagreements more related to its demand oriented nature. But the fact remains: particularly in light of the current crises, Keynes’s theories, and all their interpretive complexities, together comprise the metaphorical elephant in the room.

   Now I have yet to find a simple, jargon free application of Marxian economics to the current crises (and if I’m overlooking the obvious, please do let me know). But interpretive complexities don’t prevent such an application of Keynes’s theories, nor even Von Mises’s – though none of the Austrians would want their application to be thought through very far. (Consider the otherwise clever “Keynes Rap” (http://www.youtube.com/watch?v=d0nERTFo-Sk) which defines the Austrian’s “close the barn door after the horses have fled” approach.)

   I say all this because as an American trying to understand the first global economic crisis of the 21st century, it has become all too apparent that interpretive complexities simply don’t matter. The working classes in the US, while deeply riven politically, are generally much more conservative today than even Republicans were not all that long ago. The conceptual confusion evident in the middle class revolt against stimulus, as opposed to bailouts (an opposition not widely understood), or in the Tea Party’s occasional picketing of the Federal Reserve near my home, or in the Tea Party’s very name, has me frankly very concerned.

   Where once social activists were motivated by critical thinking and Marxist philosophies, today they are as likely to be fans (in the worst sense) of Ayn Rand’s brand of cultic trash fiction. Never mind that her high priest, Alan Greenspan, publicly admitted the error of his philosophy. Never mind that EVERYONE agrees that deregulation was the principal technical cause of the financial meltdown. Never mind that the majority of debt incurred over the last four years was incurred by Republicans and their Austrian school sympathies. Never mind all that; we apparently are more worried that our current president is a cryptofascialist (no, I’m serious, the term is “fascialist”, from the Von Mises Institute) muslim soviet style communist(!).

   While it’s true that only a relatively small proportion of Americans literally think this, it’s quite possible that there are MILLIONS of Americans who believe this. And what is there on the left to oppose this?

   It’s a trick question of course. There is no left left in the US, as far as I can see. Even old school New Deal liberals, such as Paul Krugman, are well to the outside of the cultural mainstream. Even this thread, nominally about the Marxist theory of crisis, is a blind; there is no Marxist theory of THIS crisis, only a prophecy of a gotterdammerung which has still yet to come. Now I could be wrong about Marx, and I hope I am. But my point is, where is the sense in arguing about interpretive complexities when the horses have fled and the barn is on fire?

   The most visible movement of the left in my adult lifetime was to defend the Saddam Hussein and Taliban regimes. Forty years after the general strike in France, students today are more worried about preserving the past than changing the future. In the US the policies of Hoover are all the rage among the intellectually radical. The only obvious outlet to all this ranting frustration is to go break a few windows at the next anti-globalization “protest.” I guess a certain kind of person would feel better after that.

   As for me, I can only wonder: what’s left?

   A clear analysis of THIS crisis, grounded in the language and experiences of the worldwide working classes, with practical and practicable political strategies, seems to me the minimum intellectual work required for a proper response by the left. But where is it?

   Hiding, I suspect, in Keynes’s shadow.

7. 7 Bill Kerr
   February 26, 2011 at 2:44 pm

   Lupin3,

   I think you are correct that there is no left left and that a marxist interpretation of THIS current crisis has yet to be published.

   I’m still at the stage of grappling with Marx’s voluminous critique of political economy which I see as a necessary prerequisite to developing or understanding an analysis of the current crisis.

   With respect to Keynes analysis I would suggest these sources:

   1) Simon Clarke (link to a full list of his online publications) has written a (different) book with a focus on Keynes: Keynesianism, Monetarism and the Crisis of the State, Edward Elgar, London and Vermont, 1988

   2) Sam Williams has written a series of articles critically analysing Keynes at A Critique of Crisis Theory. In fact he has 2 series, one titled “The Ideas of John Maynard Keynes” (6 parts) and a more recent one titled, “Are Marx and Keynes Compatible” (8 parts and still going). See his sidebar.

   I have only skimmed and not read these resources myself yet in any detail but plan to do so.

   Also relevant is the work of Post Keynes writers, starting with Hyman Minsky, whose bio of Keynes and Stabilizing an Unstable Economy were republished following the outbreak of the current crisis.

8. 8 Arthur
   February 26, 2011 at 4:01 pm

   I’m still reading Simon Clarke (currently distracted by having read Ilyenkov on Dialectics of the Abstract and Concrete in Marx’s Capital and deciding to read the Shirokov or “Leningrad” textbook on marxist philosophy which Mao studied and annotated when writing “On Contradiction”).

   There is currently no left capable of theorizing about the current crisis but it is a pleasant surprise given the sterility of other allegedly “Marxist economics” to find some useful insights in Simon Clarke.

   The rap video is intriguing but curent problem is not how to popularize a scientific understanding but first to acquire one. This will certainly have to be based on a critique of current serious bourgeois theory (as well as earlier versions such as both Keynes and Austrians) as well as a concrete analysis of current concrete conditions.

   I am hopeful that there are people around the world at least preparing themselves to take up that task. Thanks to the web, once any of us start coming up with something the process of systematizing it and then disseminating it should be fairly rapid.

   Meanwhile the mad hatters can have their tea parties.

9. 9 Arthur
   February 26, 2011 at 4:09 pm

   Link for Ilyenkov above didn’t work.

10. 10 Steve Owens
    February 26, 2011 at 5:07 pm

    I still hold the belief that there’s value in attempting to frame and answer the questions about crisis in as simple a way as possible.
    In the mid 70’s Capitalism was gripped by a crisis of profitability.
    Capitalism redressed this problem by intensifying the class struggle. Wage freezes,job cuts, union busts, lower spending on social services, longer work hours, privatization of state assets, increased casualization of the workforce, a declining interest in tarrif protection as inefficient industries were allowed to hit the wall and a sustained effort to cost shift onto consumers ie ending free education and co payments for previously free health care.
    Profitability was restored and the system went humming along so to speak.
    Now we come to 2008 and Capitalism faces another crisis having navigated its way through minor crises such as the Asian economic melt down, the 87 share market crash and the dot com bubble.
    The Global Finacial Crisis of 2007-2009 was a crisis of bank liquidity, brought on by a real estate bubble.
    This crisis was resolved by the state refinancing the banking sector.
    There was no crisis of overproduction or crisis of profitability or undeconsumption.
    We can search the pages of Das Capital as long as we like apparently Clarke has and he concludes that Marx had no theory of crisis in the sense that the Marxist tradition thinks he did. He also states that Marx and Engles went quiet on their publicaly held position about capitalism, crisis and its revolutionary implications.
    Just back to the crisis, it has been argued that the crisis has only been put on hold by various stimuls packages. It’s worth noting that for every dollar of Federal stimulus in the USA a dollar has been cut in spending by state and local governments. In effect there has been no stimulus spending in the USA.

11. 11 Arthur
    April 15, 2011 at 3:14 am

    I can confirm that Simon Clarke on Crisis was well worth reading so I will read some more of his stuff, perhaps starting with his books on Marginalism and Keynes.

    Also finding Pavel Maksakovsky on Capitalist Cycles very useful.

    Needs to be made available via torrent so please klick this link.a

    http://www.amazon.co.uk/gp/digital/fiona/detail/request-kindle-edition/ref=dtp_dp_su_9004138242?ie=UTF8&a=9004138242

    Both are highly unusual in writing about having actually studied marx rather than just quoting him or their own speculations simply attributed to Marx.

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