Crisis Theory in the Abstract
Feb 18 2009 15:20
Maybe its staring me in the face, but I havent came across a theory of crisis, breakdown or business cycles that makes sense. I understand that the underconsumption theory and the disproportionality theory are only possibilities and cannot really explain crisis or why it usually occurs every 7-10 years. The falling rate of profit and overaccumulation sound like they have something to them, but the explinations behind them are vague (at what point does the rate of profit become so low as to create crisis). The idea that increasing productivity destroys profits by devaluing the old machines seems like it has potential, but no trigger exists for this explination besides credit absorbing debt (I dont think credit is necessary to explain a crisis, only its displacement and larger eruption at a later date, probably wrong about this).
All I really understand is that at some point capital can no longer circulate somewhere thus creating all the effects of an economic crisis, but without any mechanism that explains when they occurs, how devistating they will be and when they will end, its impossible for me to hold any theory of crisis.
Feb 19 2009 13:36
#2
It can definitely be said that the capitalist class wants to make as much profit as they can as fast as they can, Marxism does not tell us anything new there. The argument to me seems to be based on positive reasons (to raise the profit as far as it can go), not negative reasons (to avoid crisis). Again one of my questions in when does crisis get started, the rate of profit falling only indicates some possible stagnation theory, not really economic crisis.
An artifical tsunami sounds about right when it comes to capitalist crisis, but I again dont see the means of holding these forces back (credit, the state) as important to explaining a trigger of crisis, only that they make it bigger on a later date. With all the basic crisis theories of the profit sqweeze (Vol I, Chap 25), disproportionality (Vol II, Sec III), overaccumulation or underconsumption (Vol III, Sec III) that come before credit (Vol III, Sec V) or the state (No economic explination exists) it would be clear that unless one uses a Ricardian Crisis Theory involving rent (Vol III, Sec VI) then one couldnt really argue that credit or the state is truely necessary to understanding the basics of crisis theory.
Also one should note that the rate of profit may not necessarily fall in the aggregate. The tendency for it to fall does exist, but it also competes with the countertendecies created from the falling rate of profit. I think a crisis theory should see the rate of profit falling, remaining constant or rising as possibilities. Ive also read somewhere that a crisis is the result of the tendency and the countertendencies being a contradictory unity, not entirely sure on how that works?
Feb 19 2009 19:57
#3
Quote:
An artifical tsunami sounds about right when it comes to capitalist crisis, but I again dont see the means of holding these forces back (credit, the state) as important to explaining a trigger of crisis, only that they make it bigger on a later date.
I am not sure what you mean by "trigger" in your discussion.
The capital class follows a number of "strategies" for acheiving profitability despite a decrease in the stable, long term profit rate. These strategies are not stable - Keynesianism and state stimulus can fail when the market begins to anticipate increases in state spending (among other reasons). The speculative stimulation of the economy through bubbles is even more certain to fail given that debt rises exponentially compared to the real economy.
The "trigger" for the failure of the real estate bubble was probably the increase in oil prices itself triggered by the "overheating" world economy. Is this the trigger you were thinking of?
Anyway, the housing scheme was unsustainable. Unstable means that small changes in the dynamics of the market could cause large changes in it. Unstable means that it could not be sustained. So it doesn't matter exactly what triggered it. It would have fallen apart sooner or later.
Does that make things clear?
Feb 19 2009 23:41
#4
What I mean by a trigger is more or less what is the first cause of an economic crisis in terms of capitalism’s most basic parts. I want to abstract from credit, the state and all the rest of it and know what is it about capitalist production and/or exchange that creates boom and bust in an economy?
Obviously the housing market was going to come crashing down at some point, fictitious value can only exist as long as people don’t ask for real value to replace it, once that occurs fictitious value is put into line against real value. If the circuit of productive capital or real value still produces profits, fictitious value being just above and beyond that, should it be taken away you go back to regular profits. In theory, provided that credit was not holding back crisis tendencies, once the bubble ended, profits should of falled to this level of real value. As we see they must have allowed some crisis mechanism to be displaced and grow to create devistation when it could no longer be contained in credit bubles.
Just as a note Im currently trying to get myself through a book called Marx’s Theory of Crisis by Simon Clarke which surveys Marx’s and Marxist theories of economic crisis since the 1840’s up to the 1980's. I hope that it will help me understand the subject more and perhaps give me an abstract model of capitalist crisis.
Feb 20 2009 16:37
#5
Leftcomm, you may have already seen it but there was a discussion and debate on the topic here: http://libcom.org/forums/theory/how-does-capitalism-get-itself-out-crisis-26112008
I've been reading through Marx's economic journalism and his own explanations tended to focus on disproportions caused by a relative increased in fixed capital investment relative to circulating capital. This was particularly his explanation with regard to France, because of the peculiar economic institutions there (particularly the Credit Mobilier), which heavily emphasized industrial investment. He also seemed to think that falling prices plaid a major role, at least in certain times and places.
(I should note that in the thread I linked to, I argued that the housing crisis is very different from the sort of disproportion that Marx and later Marxists talked about. Having familiarized myself with Marx's journalism, I no longer think that's the case. There are differences, but also substantial similarities. I do still think it's different than the sort of disproportionalities most Marxists have theorized.)
The issue of "triggers" and "causes" of crises are somewhat different. I don't think you can give a general theory of the triggers of crises in capitalism. It can be many things, from sudden price fluctuations (like oil shocks), to a downturn in a housing prices (itself probably triggered by some event), or even a simple rumor that a major firm is going to fail.
The best general introduction and overview of different Marxist crisis theories is almost certainly Shaikh's: An Introduction to the History of Crisis Theories. I highly recommend reading it for anyone who is interested in crisis theory.
Personally I wouldn't bother too much with the Simon Clarke. I only read parts of that book but I couldn't shake the impression that he didn't really know what he was talking about. The Shaikh is a far better introduction.
This is how I would explain how a declining rate becomes an acute crisis.
The rate of profit declines and so each capital enterprise feels pressure. The fact that each enterprise has borrowed a fair portion of its capital increases the pressure the enterprise feels. Thus the capitalist class as a whole feels pressure to "do something".
So, to alleviate the decline in the rate of profit, the state encourages various schemes (what Marx call "countervailing tendencies"). For example, after the "stagflation" of the 1970, the bourgeois embarked on a program of "neoliberalism", aiming to increase profits by bringing the market to all countries, reducing wages and encouraging speculation. This approach indeed shored up the profit rate for a while but then resulted in a more and more unstable situation. The "marketization" in the US basically resulted in a good portion of the people in the richest country on earth living on credit.
A lot of people could see the present financial collapse coming in some form but the desperation of the capitalists for some way to restore and maintain profits drove them to embrace the ideology of Milton Freidman and Alan Greenspan, an ideology certainly today seems very discredited.
But that's basically how I see it happening. If the rate of profit declined slowly, then each enterprise might indeed only have to deal with the results slowly. But because the decline is held back by "artificial" means (unstable approaches varying from bubbles to state spending) the capitalists encounter the declining rate of profit as one giant wave. Indeed, we hear about the present situation as being an "economic tsunami". Of course, unlike a natural tsunami, we can chart the forces which went into its creation and as communists we have our ideas about what to do about it.