Crises and cycles in the economy of dying capitalism, part 1

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This article is the first part of a study published in the review Bilan in 1934, by the Left Fraction of the Italian Communist Party. The study’s aim was to “better penetrate the meaning of the crises which have periodically shaken the whole capitalist apparatus, and in conclusion to try to characterise and define as precisely as possible the era of definitive decadence which capitalism fills with the bloody upheavals of its death-agony”.

The intention was to update and deepen the classic marxist analysis, in order to understand why capitalism is condemned to cyclical crises of production, and why with the 20th century and the progressive saturation of the world market, it had entered into another phase: the phase of irreversible decadence. The cyclical crises did not disappear, but gave way to a phenomenon that was at once more serious and more profound: the historic crisis of the capitalist system, a situation of permanent contradiction that sharpened with time, between capitalist social relations and the development of the productive forces. The capitalist form of production had become not only a barrier to progress, but a threat to the very survival of humanity. Mitchell’s1 study returns to the foundations of the marxist analysis of profit and the accumulation of capital. It shows the continuity between the analyses of Marx and those of Rosa Luxemburg who, in The accumulation of capital, explained capitalism’s tendency towards ever more deadly convulsions, and the historic limits of a system which has entered an era of “crises, wars, and revolutions2.

Mitchell’s work of updating and deepening remains entirely valid in the present period. Bilan could not imagine today’s dimension of debt, financial speculation, currency manipulation, company mergers and concentration. Nonetheless, this analysis provides all the foundations for understanding their mechanisms. This document thus allows us to restate the foundations of the analyses developed in the article on “The new economy” published in this issue; they will be clearer still with the second part of the study, which will be published in the next issue of the International Review: “The analysis of the general crisis of decadent imperialism”.


The marxist analysis of the capitalist mode of production aims to deal essentially with the following points:

  1. the critique of the remains of feudal and pre-capitalist modes of production and exchange;

  2. the need to replace these backward forms by the more progressive capitalist form;

  3. the demonstration of the capitalist mode of production’s progressive nature, by revealing the positive aspect and social usefulness of the laws that rule its development;

  4. the examination, from the standpoint of a socialist critique, of these same laws’ negative aspect and their contradictory and destructive action, leading the evolution of capitalism into a dead end;

  5. the demonstration that the capitalist forms of appropriation in the end form a hindrance to the full flourishing of production, and that consequently the mode of production creates an ever more intolerable class situation, expressed in an increasingly profound rift between the CAPITALISTS, ever richer and less numerous, and the propertyless WAGE-EARNERS, ever more numerous and more wretched;

  6. finally, the recognition that the immense productive forces developed by the capitalist mode of production can only flourish harmoniously in a society organised by the only class that expresses no particular caste interest: the PROLETARIAT.

In this study, we will not analyse in depth the organic evolution of capitalism’s ascendant phase. We will limit ourselves to following the dialectical process of its internal forces, the better to penetrate the significance of the crises which have periodically shaken the whole capitalist productive apparatus. Finally, we will try to define as precisely as possible capitalism’s era of definitive decadence, in which it is being shaken by the bloody upheavals of its death-agony.

We will also examine how the decomposition of the pre-capitalist economies – feudalism, craft production, the peasant community – creates the conditions for the extension of the market for capitalist commodities.

Capitalist production satisfies the demand for profit, not human need

Let us summarise the essential preconditions for capitalist production.

  1. The existence of COMMODITIES, in other words of products which, before they can be considered as USE VALUE according to their social utility, appear in a relationship of exchange with other use values of different kinds, that is to say as EXCHANGE VALUE. The real common measure of commodities is labour, and their exchange value is determined by the labour time socially necessary for their production.
  2. Commodities are not exchanged DIRECTLY, but through the intermediary of a CONVENTIONAL universal commodity which expresses all their values, the commodity MONEY.
  3. The existence of a commodity with a particular characteristic – LABOUR POWER – which is the proletarian’s only property and which capitalism, sole owner of the means of production and subsistence, buys on the labour market like any other commodity at its VALUE, in other words its cost of production or the price of “maintaining” the proletarian’s life energy. But whereas the consumption of other commodities creates no increase in their value, labour power on the contrary procures for the capitalist who has bought it, and is therefore its owner and can dispose of it as he will, a value greater than its cost, provided that he makes the proletarian work longer than is necessary to produce the strict minimum vital for his subsistence.

It is this SURPLUS VALUE equivalent to his SURPLUS LABOUR that the proletarian is obliged to give the capitalist for free, by virtue of the fact that he sells his labour power “freely” and contractually. This is what constitutes the capitalist’s PROFIT. This is not therefore something abstract, a fiction, but LIVING LABOUR.

We apologise for this insistence on what is after all the ABC of marxist economic theory. If we do so, it is because we must not lose sight of the fact that all the economic and political problems that capitalism confronts (and in a period of crisis, these are numerous and complex) all boil down to this central objective: how to produce the MAXIMUM of SURPLUS VALUE. Capitalism cares not a jot for production for the needs of humanity, for the its consumption and its vital needs. ONE CONSUMPTION ALONE excites its interest and passion, stimulates its energy and its will, gives it reason to exist: the CONSUMPTION OF LABOUR POWER!

Capitalism uses this labour power to obtain the highest return possible, corresponding to the greatest quantity of labour power possible. But this is not all: it must also raise to the maximum the ratio of free to paid labour, the ratio of profit to the wages and capital employed, the RATE OF SURPLUS VALUE. The capitalist achieves his ends, on the one hand by increasing total labour, by lengthening the working day and intensifying working practice, and on the other by paying for labour power as cheaply as possible (even below its value), thanks above all to the development of labour productivity which lowers the cost of goods of primary necessity and subsistence. Capitalism of its own free will obviously does not allow the worker to buy more products thanks to the fall in prices Wages always fluctuate around the axis of the value of labour power, which is equivalent to those things strictly indispensable to its reproduction: the movement of the value of wages above or below this value evolves parallel to the fluctuations in the balance of forces between capitalists and proletarians.

From what precedes, it follows that the quantity of surplus value is a function not of the TOTAL capital employed, but only of the part devoted to the purchase of labour power, or VARIABLE CAPITAL. This is why the capitalist tends to make the MINIMUM of TOTAL CAPITAL produce the MAXIMUM of SURPLUS VALUE, but as we will see when we analyse accumulation, this tendency is countered by a law that acts in the opposite direction and leads to a fall in the rate of profit.

When we consider total capital, or the capital invested in capitalist production – let us say for one year – we must consider it, not as an expression of the concrete, material form of things, of their use value, but as representing commodities, exchange value. This being the case, the value of the annual product is made up:

  1. of consumed constant capital, that is to say the means of production that have been worn out, and raw materials absorbed: these two elements express past labour, that has already been consumed, materialised, during previous periods of production;

  2. of variable capital and surplus value representing new, living labour consumed during the year.

This synthetic value, as it appears in the total product, is found in the unitary product: the value of a table, for example, is the sum of the value equivalent to the wear of the machine that produced it, plus the value of the raw material, and of the labour incorporated in it. The product should not therefore be considered as expressing exclusively either constant capital, variable capital, or surplus value.

Variable capital and surplus value form the revenue that springs from the sphere of production (since we have not here considered the extra-capitalist production of the peasants or craftsmen, etc., we do not include their revenue either).

The proletariat’s revenue is the wage fund. The bourgeoisie’s revenue is the mass of surplus value, of profit (we will not analyse here the division of surplus value within the capitalist class, into industrial profit, commercial profit, banking profit and money rent). Thus determined, the revenue from the capitalist sphere fixes the limits of individual consumption for both the proletariat and the bourgeoisie. However, it is important to emphasise that the capitalists’ consumption is only limited by the possibilities of the production of surplus value, whereas the workers’ consumption is strictly a function of the necessities of this same production of surplus value. Hence, there is a fundamental antagonism at the basis of the division of total revenue, which engenders all the others. To those who say that the workers need only produce in order to consume, or that since their needs are unlimited they are always below the possibilities of production, we reply with the words of Marx: “what the workers produce in fact is surplus value: as long as they produce it, they can consume, but as soon as production stops, consumption stops likewise. It is not true that they are able to consume because they produce the equivalent of their consumption”. He says, moreover: “The workers must always be over-producers (surplus value), and produce beyond their ‘needs’ in order to be able to be consumers or buyers within the limits of their needs”.

But for the capitalist, it is not enough to appropriate surplus value, he cannot content himself with despoiling the worker of a part of the fruits of his labour; he must be able to realise this surplus value, transform it into money by selling the product that contains it, at its value.

Sale conditions the renewal of production: it allows the capitalist to replace the elements of capital used up in the process that has just terminated; he has to replace worn out equipment, buy new raw materials, pay the workforce. But from the capitalist viewpoint, these elements are considered not in their material form as a similar quantity of use values, as the same quantity of production to be reincorporated into the productive process, but as exchange value, as capital reinvested in production at its old level (ignoring the new accumulated value) in order to maintain at least the same level of profit as previously. To begin the cycle again, in order to produce new surplus value remains the capitalist’s supreme objective.

If production cannot be entirely realised, or if it is realised below its value, then the exploitation of the worker has earned little or nothing for the capitalist, because the free labour has not been concretised in money, and then converted into new capital capable of producing surplus value. The fact that consumable products have nonetheless been produced leaves the capitalist completely indifferent, even if the working class lacks for essentials. If we envisage the possibility of a failure to sell, it is precisely because the capitalist process of production is divided into two phases: production and sale. Although these two phases form a unity, and are closely inter-dependent, they take place quite separately. Thus the capitalist, far from dominating the market, is on the contrary completely subjected to it. Not only is sale separate from production, but the subsequent purchase is separate from the sale; in other words, the vendor of a commodity is not necessarily and at the same time the buyer of another commodity. In the capitalist economy, trade in commodities does not mean their direct exchange: all commodities, before they arrive at their definitive destination, must metamorphose into money, and this transformation is the most important phase in their circulation.

The first possibility of crises therefore springs from the differentiation between on the one hand, production and sale, and on the other between sale and purchase, whence the necessity for the commodity to be metamorphosed first into money, then from money to commodity, and this on the basis of a production that starts from capital-money to end up as money-capital.

Here then, capitalism finds itself confronted with the problem of the realisation of production. What are the conditions for its solution? Firstly, in normal conditions the fraction of the product’s value that embodies constant capital can be sold within the capitalist sphere itself, through an internal exchange which conditions the renewal of production. The fraction representing variable capital is purchased by the workers, thanks to the wages paid them by the capitalist, and strictly within the limits that we have pointed out, since the price of labour power gravitates around its value: this is the only part of the total product whose realisation, and whose market, are assured by the financing of capitalism itself. There remains surplus value. We could of course envisage the possibility that the bourgeoisie devotes all of this to its personal consumption, although for this to happen the product would first have to have been exchanged for money (we dismiss the possibility that individual expenses could be paid with already hoarded money), since capitalism cannot consume its own production. But if the bourgeoisie behaved like this, if it did no more than enjoy the fruits of the surplus product that it takes from the proletariat, if it limited itself to a simple, rather than enlarged reproduction, thus guaranteeing itself a peaceful and carefree existence, then it would be no different from previous ruling classes, except in its forms of domination. The structure of slave society prevented any technical development and maintained production at a level which perfectly satisfied the slave-owner, whose needs were amply met by the slaves. Similarly, the feudal lord, in exchange for the protection he gave the serf, received from the latter the produce of his extra work and thus rid himself of the concerns of production, the market being limited to a narrow and inelastic range of exchanges.

Under the impetus of the development of a mercantile economy, capitalism’s historic task was precisely to sweep away these sordid, stagnant societies. The expropriation of the producers created the labour market and opened the valves of surplus value for a mercantile capital transformed into industrial capital. A productive fever gripped the whole social body. Spurred on by competition, capital attracted capital. The productive forces and production grew geometrically, and capitalist accumulation reached its apogee during the last third of the 19th century with the flourishing of “free trade”.

History thus demonstrates that the bourgeoisie, taken as a whole, cannot be content with consuming the whole of the surplus value. On the contrary, its eager search for profit encouraged the bourgeoisie to set aside the greater part of the surplus value and – since profit attracts profit as the magnet attracts iron – to transform it into CAPITAL. Production continued to expand, competition stimulating its movement and presupposing technical improvement.

The demands of accumulation transformed the realisation of surplus value into a stumbling block to the realisation of the total product. While the realisation of the part reserved for consumption poses no problems (at least in theory), there nonetheless remains the surplus value reserved for accumulation. This cannot be absorbed by the proletarians, since their purchasing power is limited to their own wages. Can we suppose that it could be absorbed by exchange among the capitalists and within the capitalist sphere, and that this exchange would be sufficient to extend production?

Such a solution is evidently absurd in the end, since as Marx points out: “capitalist production supposes, not the possession of more and more goods, but the appropriation of value, money, abstract wealth”. The extension of production is a function of the accumulation of this abstract wealth; the capitalist does not produce for the pleasure of producing, for the pleasure of accumulating means of production and consumption, or of “stuffing” more and more workers, but because production engenders free labour, surplus value which accumulates, and grows more the more it is transformed into capital. Marx adds: “If we say that the capitalists need only exchange and consume their commodities amongst themselves, then we forget the whole character of capitalist production, since it is also necessary to valorise capital, and not to consume it”.

We thus find ourselves at the heart of the problem which is constantly and inevitably posed to the capitalist class as a whole: that of selling outside the capitalist market, whose absorptive capacity is strictly limited by the laws of capitalism, since the surplus production represents at least the value of the surplus value which is not consumed by the bourgeoisie, but is destined to be transformed into capital. It is inescapable: commodity capital cannot become capital that produces surplus value unless it is first converted into money outside the capitalist market. “To sell a part of its commodities, capitalism needs buyers who are neither capitalists nor wage-earners, and who dispose of an autonomous purchasing power” (Rosa Luxemburg).

Before we consider where and how capital finds buyers with this “autonomous” purchasing power, we must first follow the process of accumulation.

Capitalist accumulation, a factor of progress and regression

We have already pointed out that the growth of working capital within production at the same time develops the productive forces, under the impetus of technical improvements. However, along with this positive and progressive aspect of capitalist production there emerges a regressive, antagonistic factor arising from the modification of the internal relationship of capital’s component parts.

Accumulated surplus value is divided into two unequal parts: one – the largest – must serve to extend constant capital, while the smaller part is devoted to the purchase of extra labour power; the rhythm of increase of constant capital thus accelerates to the detriment of variable capital, and the share of constant capital as a part of the whole grows: in other words, capital’s organic composition rises. The demand for extra workers certainly increases the proletariat’s absolute share of the social product, but its relative share declines, since variable capital declines relative to constant capital and total capital. However, even the absolute growth in variable capital, the wages fund, cannot continue indefinitely: at a certain moment, it reaches saturation point. In fact, the continuing rise in organic composition (in other words, of capital’s technical development) develops the power of the productive forces and of labour productivity to such a point that capital’s continued rise, far from absorbing ever more new labour power, on the contrary ends up by throwing onto the market a part of that labour power which has already been integrated into production, thus producing a “phenomenon” which is specific to decadent capitalism: permanent unemployment, the expression of a relative and constant “over-population” of the working class.

On the other hand, the full significance of the gigantic proportions reached by production lies in the fact that the mass of products or use values grows much more quickly than the corresponding mass of exchange value, than the value of constant capital consumed, of the variable capital and the surplus value; thus, for example, when a machine costing 1000 francs and able to produce 1000 units of a given product and needing two workers to operate it, is replaced by one costing 2000 francs, needing only one worker, but capable of producing three or four times more than its predecessor. It may be objected that since more products can be obtained with less labour, the worker’s wage can therefore buy more, but this forgets completely that products are first and foremost commodities, and that labour power is also a commodity: consequently, as we said at the outset, this commodity Labour Power can only be sold at its exchange value, which is equivalent to the cost of its reproduction, which in turn represents the strict minimum necessary for the worker to maintain his existence. If technical progress reduces the cost of this subsistence, then the workers’ wage will diminish correspondingly. And even if this reduction is not proportional to the fall in the cost of products, due to a balance of forces favourable to the proletariat, it must in every case fluctuate within the limits compatible with the demands of capitalist production.

The process of accumulation thus deepens a first contradiction: growth of the productive forces, decline of the labour power devoted to production, and development of a permanent relative over-population of the working class. This contradiction creates another. We have already shown what are the factors that determine the rate of surplus value. However, it is important to emphasise that for a constant rate of surplus value, the mass of surplus value, and so the mass of profit, will always be proportional to the mass of variable capital engaged in production. If variable capital decreases in relation to total capital, then the mass of profit relative to total capital also falls, and as a result, the rate of profit decreases. This fall in the rate of profit sharpens as accumulation progresses, and as constant capital increases relative to variable capital, while at the same time the mass of profit continues to rise (as a result of a rise in the rate of surplus value). It therefore does not in the least express a less intense exploitation of the workers, but means that less labour is used in relation to total capital, thus obtaining less free labour. Moreover, it accelerates the rhythm of accumulation because it harasses capitalism, biting at its heels, forcing it to extract the maximum surplus value from a given number of workers, and thus to accumulate more and more surplus value.

The law of the tendency for the rate of profit to fall generates cyclical crises, and is a powerful catalyst in the decomposition of the decadent capitalist economy. Moreover, it provides us with an explanation for the export of capital, which is one of the specific traits of imperialist and monopolist capital: “the export of capital”, says Marx, “is not caused by the impossibility of employing it at home, but by the possibility of placing it abroad at a higher rate of profit”. Lenin confirms this idea (in his Imperialism, the Highest Stage of Capitalism), saying that “the need to export capital results from the capitalism’s excessive maturity in certain countries, where advantageous investments [our emphasis] are in short supply, agriculture being backward and the masses wretched”.

Another factor which helps to accelerate accumulation is credit, a panacea which today has acquired a magical power in the eyes of bourgeois and social-democratic economists in search of salvation and solutions: a magical word in the country of Roosevelt, a magical word for all the enthusiasts of the planned (capitalist) economy: for De Man3, for the bureaucrats of the CGT and other saviours of capitalism. Apparently, credit has the virtue of creating purchasing power.

However, once stripped of all its deceitful pseudo-scientific rags, credit can be defined very simply as follows: the putting at capital’s disposal, via its financial apparatus:

  1. of money temporarily unused in the production process and destined for the renewal of constant capital;

  2. of the fraction of surplus value that the bourgeoisie does not consume immediately, or that it cannot accumulate;

  3. of the sums available to non-capitalist strata (peasants, artisans), or to privileged strata of the working class, in a word of everything that constitutes SAVINGS, and expresses a potential purchasing power.

At most, therefore, the operation of credit cannot do more than transform latent purchasing power into new purchasing power. Moreover, it is a problem that is only of interest to those who want to amuse idle onlookers. What concerns us is that savings can be mobilised for capitalisation and so increase the mass of accumulated capital. Without credit, savings would only be hoarded money, not capital. “Credit increases immeasurably the capacity for the extension of production, and is the internal motive force that constantly pushes it to go beyond the limits of the market” (R. Luxemburg).

A third accelerating factor should be pointed out. It is impossible for the bourgeoisie to adapt its own consumption to the vertiginous increase in the mass of surplus value. No matter how voracious its “stomach”, it cannot absorb the extra surplus value produced. Even if its gluttony pushed it to consume more, it could not do so, for it is subjected to the implacable law of competition: expanding production in order to reduce the cost price. Since the fraction of surplus value that is consumed is more and more reduced relative to total surplus value, the rate of accumulation increases. Whence a new cause of contraction of the capitalist market.

We will just mention here a fourth accelerating factor, which appeared in parallel with credit and banking capital, and is a product of the competitive process of selection: the centralisation of capital and means of production in gigantic enterprises which, by increasing the surplus value for accumulation “in bulk”, increase much more rapidly the mass of capital. Since these enterprises evolve organically into parasitic monopolies, they also become a virulent catalyst for disintegration in the period of imperialism.

Let us now summarise the fundamental contradictions which undermine capitalist production:

  1. on the one hand, a production that has reached a level resulting in mass consumption; on the other, the demands of this production itself shrink the foundations of consumption within the capitalist market: relative and absolute decrease of the proletariat’s share in total product, relative restriction of the capitalists’ individual consumption;

  2. the need to realise outside the capitalist market that fraction of the product which cannot be consumed internally, corresponding to accumulated surplus value, which increases rapidly and constantly under the pressure of various accelerating factors.

It is necessary therefore, on the one hand, to realise the product before production can begin again, and on the other to enlarge the available outlets in order to be able to realise the product.

As Marx emphasises: “Capitalist production is forced to produce on a scale which has nothing to do with present demand, but depends on a continual extension of the world market. The demand of the workers is not enough, since profit comes precisely from the fact that the workers’ demand is less than the value of their product, and profit is all the greater when their demand is relatively less. The reciprocal demand of the capitalists is not enough either”.

How then will this continuous extension of the world market happen, this constant creation and widening of extra-capitalist markets whose vital importance for capitalism was emphasised by Rosa Luxemburg? Because of its historic position in the evolution of society, capitalism, if it is to continue to survive, must pursue the struggle that it first began to create the foundations for the development of its production. In other words, if capitalism is to transform into money and accumulate the surplus value that it sweats from every pore, it must disintegrate the old economies that have survived the upheavals of history. In order to sell the products that the capitalist sphere cannot absorb, it must find purchasers, and these can only exist in a market economy. Moreover, in order to maintain the scale of its production, capitalism needs immense reserves of raw materials, which it can only appropriate in the countries where they exist on condition that it does not come up against forms of property which create a barrier to its aims, and on condition that it can dispose of the labour power necessary to exploit these coveted riches. Wherever there still survive slave-holding or feudal economies, or peasant communities where the producer is tied to his means of production and works to satisfies his own needs, capitalism therefore has to create the conditions and open the way to attain its objectives. Through violence, expropriation and taxation, and with the support of these regions’ ruling strata, capitalism first destroys the last vestiges of collective property, transforms production to satisfy the demands of production for the market, establishes new production corresponding to its own needs, amputates the peasant economy of those crafts which complemented it. It thus creates a market where the peasant is forced to sell his agricultural produce – which is all that he can still produce – in exchange for the junk churned out of the capitalist factories. In Europe, the agricultural revolution of the 15th and 16th centuries had already brought about the expropriation and expulsion of a part of the rural population, and created the market for the emerging capitalist production. Marx remarked, on this point, that only the annihilation of domestic cottage industry could give a country’s home market the extension and cohesion that the capitalist mode of production needs.

Capitalism’s insatiable appetite does not stop there. It is not enough to realise surplus value. Capitalism must now eradicate the independent producers which it has caused to emerge from the primitive societies, and which have retained their means of production. It must replace their production, and replace it with capitalist production, in order to find employment for the masses of accumulated capital which threaten to stifle it. The industrialisation of agriculture begun in the second half of the 19th century, especially in the United States, provides a striking illustration of the disintegration of the peasant economies, which has widened the divide between the capitalist farmers and agricultural proletarians.

In the exploited colonies, despite the fact that the process of capitalist industrialisation remained very limited, the expropriation and proletarianisation of the mass of the indigenous population filled the reservoirs from which capitalism draws the labour power to supply it with cheap raw materials.

As a result, realising surplus value means for capitalism the progressive and continual annexation of pre-capitalist economies, whose existence is vital to it, but which it must nonetheless annihilate if it wants to continue its reason for existence: accumulation. Whence there appears another connected and fundamental contradiction: capitalist accumulation and production develop, fed by the “human” substance of the extra-capitalist milieus, but also by gradually exhausting them. What was once an “autonomous” purchasing power able to absorb surplus value – for example, the consumption of the peasantry – becomes a specifically capitalist purchasing power (in other words one that is confined within the strict limits determined by variable capital and consumable surplus value) as soon as the peasantry divides into proletarians and capitalists. Capitalism, in a sense, saws off the branch on which it is sitting.

We could of course imagine an epoch where capitalism has extended its mode of production throughout the world, and achieved equilibrium in the productive forces along with social harmony. But it seems to us that if Marx, in his schemas of enlarged reproduction, hypothesised an entirely capitalist society where the only opposition was between capitalists and proletarians, this was precisely in order to demonstrate the absurdity of a capitalist society one day achieving an equilibrium and harmony with the needs of humanity. This would mean that the surplus value available for accumulation, thanks to the expansion of production, could be realised directly, on the one hand by the purchase of new means of production, on the other by the demand of the extra workers (and where would they be found?), and that the capitalists would have been transformed from wolves into peaceful progressives.

Had Marx been able to continue the development of his schemas, he would have ended with this opposing conclusion: that a capitalist market which can no longer be extended by the incorporation of non-capitalist milieus, an entirely capitalist production – which is impossible historically – would mean an end to the process of accumulation and the end of capitalism itself. Consequently, to present these schemas (as some “marxists” have done) as the image of a capitalist production able to continue without imbalance, without over-production, without crises, is consciously to falsify marxist theory.

However, while capital prodigiously increases production, it is unable to adapt this production harmoniously to the capacity of the markets which it has managed to annex. On the one hand, the markets do not expand continuously, while on the other the various accelerating factors we have mentioned give an impetus to accumulation, causing production to expand far more rapidly than the extension of new extra-capitalist outlets. Not only does the process of accumulation engender an enormous quantity of exchange values, but as we have said, the growing capacity of the means of production increases the mass of use values in still greater proportions. As a result, the production process is capable of satisfying mass consumption, but the sale of its products is subordinated to the constant adaptation of a capacity for absorption which only exists outside the capitalist sphere.

If this adaptation does not take place, then there is over-production of commodities, relative not to the capacity of consumption, but to the purchasing power of the internal capitalist market, and the external extra-capitalist market.

If over-production could only exist once every inhabitant of a country had satisfied their most urgent needs, then any general or even partial over-production would have been impossible throughout the past history of bourgeois society. When the market is saturated with shoes, cotton goods, wines, colonial produce etc, does this mean that a part of the nation – let us say two thirds – has more than satisfied its needs in terms of shoes, etc? Over-production is not a matter of absolute need; it only concerns itself with a need that is “solvent” (Marx).

This kind of over-production is not to be found in any previous society. In the ancient, slave-holding society, production was directed towards the satisfaction of the needs of the ruling class. The low level of the means of production required the exploitation of slaves to stifle, violently, any inclination to expand the needs of the masses. Whenever any accidental over-production did occur, then it was absorbed either by hoarding or by an expansion of luxury consumption; in other words, it was not so much over-production as over-consumption by the rich. Similarly, in the feudal regime, the low level of production was easily consumed. The greater part of the serf’s product was devoted to satisfying the needs of the feudal lord, while the serf himself did his best to avoid dying of hunger: wars and famines made sure that there was no danger of over-production.

In the capitalist regime, the productive forces overflow a foundation which has become too narrow to contain them: capitalist products are abundant, but have only repulsion for mere human need; they only “give” themselves in exchange for money, and when there is no money they prefer to pile up in factories, shops and warehouses, or even just to rot.

The chronic crises of ascendant capitalism

The only limits to capitalist production are those imposed by the possibility of valorising capital: as long as surplus value can be extracted and capitalised then production progresses. Its disproportion to the general consumptive capacity only appears when the flood of commodities comes up against the limits of the market, and blocks the channels of circulation: in other words, when the crisis breaks out.

It is obvious that the economic crisis goes beyond the definition that limits it to a break in the equilibrium between various sectors of production, as some bourgeois economists, and even some marxists, claim. Marx points out that “in periods of general over-production, over-production in certain spheres is only the result, the consequence of over-production in the main branches: there is only relative over-production there because there is over-production in other spheres”. Obviously, too flagrant a disproportion, for example between the sector producing means of production, and that producing means of consumption, may determine a partial crisis: it may even be the original cause of a general crisis. The crisis is the product of a general and relative over-production, an over-production of produce of every kind (whether means of production or consumption) relative to the demands of the market.

In short, the crisis is the expression of capitalism’s inability to draw profit from the exploitation of the worker: we have already shown that it is not enough to extort unpaid labour and to incorporate this in the product in the form of a new value, surplus value; it must also be materialised in the form of money through the sale of the total product at its value, or rather at its price of production which is made up of the cost price (the value of the committed capital, both constant and variable), and the average social profit (not the profit made by each particular production). On the other hand, the market price, although theoretically it is the monetary expression of the production price, in reality differs from it because it follows the curve established by the mercantile law of supply and demand, while nonetheless moving within the orbit of value. We should therefore emphasise that crises are characterised by abnormal fluctuations in prices, resulting in a considerable depreciation of values, which can go as far as their destruction, equivalent to a loss of capital. The crisis abruptly lays bare the fact that such masses of means of production, means of consumption, and means of labour have been produced that it has become impossible to make them function as instruments of exploitation of the workers at a certain rate of profit; when this rate falls below a level acceptable to the bourgeoisie, or even threatens to suppress profit altogether, it perturbs the process of production and can even paralyse it. Machines stop, not because they have produced more than can be consumed, but because the existing capital no longer receives the surplus value that makes it live. The crisis thus disperses the mists of capitalist production; it powerfully emphasises the fundamental opposition between use value and exchange value, between the needs of human beings and the needs of capital. For Marx, “Too many commodities have been produced for the value and the surplus value that they contain to be realised and reconverted into new capital, within the conditions of distribution and consumption given by capitalist production. There is not over-production of wealth. But periodically, too much wealth is produced in its opposing capitalist forms”.

This almost mathematical periodicity of crises is one of the specific traits of the capitalist system of production. Neither this periodicity, nor the specific nature of capitalist crises, are to be found in any previous society: crises due to an excess of wealth were unknown in the ancient, patriarchal, or feudal economies, based essentially on the satisfaction of the needs of the ruling class and dependent neither on technical progress nor on a market encouraging a broad current of exchange, since – as we have seen – over-production was impossible and economic disasters were the result either of natural causes (drought, floods, epidemics), or of social factors like wars.

Economic crises only appear at the beginning of the 19th century when capitalism, consolidated by its bitter and successful struggles against feudal society, enters its period of flourishing expansion, and begins its conquest of the world, solidly established on its industrial foundations. Henceforth, capitalist production developed unevenly. Feverish output to satisfy the growing demand of the world market was followed by a blockage of the market. The ebb in circulation profoundly shook the whole mechanism of production. Economic life thus forms a long chain, where each link constitutes a cycle divided into a succession of periods of average activity, prosperity, over-production, crisis and depression. The breaking point in the cycle is the crisis, “the temporary and violent resolution of existing contradictions, a violent eruption which temporarily re-establishes the upset equilibrium” (Marx). The periods of crisis and prosperity are therefore inseparable, and each conditions the other.

Until the mid-19th century, Britain, the cradle of industrial capitalism, remained the centre of gravity of these cyclical crises. The first crisis of over-production occurred in 1825 (the previous year, the trades union movement had begun to expand on the basis of the law on coalitions that the proletariat had won from the bourgeoisie). The origins of this crisis were curious for the time: the substantial loans engaged on the London market by the young South American republics had all been spent, resulting in an abrupt contraction of these markets. The crisis particularly affected the cotton industry, leading to a loss of its monopoly and revolts by the cotton workers. The crisis was overcome by an extension of outlets, which had been essentially limited to Britain: firstly, in Britain itself capital could still find vast regions to transform and capitalise through the penetration of the British countryside, and secondly, the development of exports to India opened up the market for the cotton industry; railway construction and the development of the machine tool industry opened the market to the engineering industry, which definitively got off the ground. In 1836, the cotton industry slumped after a long depression that had followed a period of prosperity; this generalised the crisis, and the starving weavers were once again offered up as expiatory victims. The crisis came to an end in 1839 with the expansion of the railway network, but in the meantime the Chartist movement was born, expression of the British proletariat’s first political aspirations. In 1840, another depression in the British textile industry led to workers’ revolts, and was to continue until 1843. Expansion began again in 1840, leading to a period of great prosperity in 1845. A general crisis broke out in 1847, and spread to the continent. It was followed by the Parisian insurrection of 1848, and the German revolution which lasted until 1849, when the American and Australian markets opened to European and above all British industry; at the same time an enormous expansion of the railway network began on the European continent.

Already at the time, Marx in the Communist Manifesto had established the general characteristics of crises, and emphasised the antagonism between the development of the productive forces and their bourgeois appropriation. With brilliant profundity, he sketched the perspectives for capitalist production: “And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented". Beginning with the second half of the 19th century, industrial capitalism began to dominate the continent. The industrial take-off of Germany and Austria began in 1860. As a result, crises became more and more far-reaching. The 1857 crisis was brief, thanks to the expansion of capital, above all in Central Europe. The British cotton industry reached its apogee in 1860, following the saturation of the markets in India and Australia. The War of Secession between the American states deprived it of cotton, provoking its complete collapse in 1863, which in turn led to a general crisis. But British and French capital lost no time, and between 1860 and 1870 established solid positions in Egypt and China.

The period from 1850 to 1873 was extremely favourable to the development of capital. It was characterised by long phases of prosperity (about 6 years) and short depressions of about 2 years. During the period that followed, from the 1873 crisis until 1896, the process was reversed: chronic depression broken by brief ascendant phases: Germany (after the Peace of Frankfurt in 1871) and the USA had just appeared as formidable competitors to Britain and France. The prodigious rhythm of capitalist production’s development overtook the rhythm of market penetration: there were crises in 1882 and 1890. The great colonial struggles for the division of the world got under way, and under the pressure of an enormous accumulation of surplus value, capitalism launched itself into the phase of imperialism, which was to lead to general crisis and bankruptcy. In the meantime, there were the crises of 1900 (the Boer War and the Boxer Rebellion), and 1907. The crisis of 1913-14 was to explode into world war.

Before analysing the general crisis of decadent imperialism, which is the object of the second part of our study, we need to examine the trajectory of each of the crises of the expansionist epoch.

The two extreme points of an economic cycle are:

  1. the final phase of prosperity, which leads to the culminating point of accumulation, expressed in the highest organic composition of capital; the power of the productive forces reaches a point of rupture with the capacity of the market; as we have pointed out, this also means that the low rate of profit corresponding to the high organic composition clashes with the demands of the valorisation of capital;

  2. the most profound phase of the crisis, corresponding to a complete paralysis of the accumulation of capital and immediately preceding the depression.

Between these two moments, there take place on the one hand the crisis itself, a period of upheavals and the destruction of exchange values, and on the other hand the depression, followed by a recovery and prosperity fertile in new value.

The unstable equilibrium of production, undermined by the progressive deepening of capitalist contradictions, is abruptly ruptured when the crisis breaks out, and it can only be re-established when capital-values are restored to health. This clean-out begins with a fall in the prices of finished products, while the price of raw materials continues to rise for a while. The contraction of commodity prices obviously leads to the depreciation of the capital materialised in these commodities, and the fall continues until a greater or lesser fraction of capital has been destroyed, depending on the gravity and intensity of the crisis. There are two aspects to the process of destruction: on the one hand, a loss of use values as a result of the complete or partial stopping of the productive apparatus, which leads to the deterioration of unused machinery and raw materials, and on the other a loss of exchange values, which is more important because it attacks the process of the renewal of production, which it halts and disorganises. The first shock hits constant capital; the diminution of variable capital does not follow simultaneously, since the fall in wages generally comes after the fall in prices. The contraction in values prevents their reproduction on the old scale; moreover, the paralysis of the productive forces prevents the capital that they represent from existing as such: as capital, it is dead and non-existent, even though it continues to exist in its material form. The process of accumulation of capital is also interrupted because the surplus value for accumulation has been swallowed up by the fall in prices, even though the accumulation of use values may very well continue thanks to already planned extensions to the productive apparatus.

The contraction in values brings with it the contraction in enterprises: the weakest go under, or are absorbed by the strongest, which are less vulnerable to the fall in prices. This centralisation does not take place without a struggle: as long as prosperity lasts, as long as there is loot to be shared, it is divided up between the different fractions of the capitalist class at the pro-rata of the capital committed; but as soon as the crisis hits, and losses become inevitable for the class as a whole, each individual capitalist or group of capitalists tries by every means possible to limit their own losses, or to transfer them to the next man. Class interest disintegrates under the impetus of particular, disparate interests, whereas in normal times these latter respect a certain discipline. We will see that in general crises, it is on the contrary the general class interest that predominates.

But the fall in prices, which has made it possible to liquidate old stocks of goods, comes to an end. Progressively, equilibrium is re-established. Capital values return to a lower level, organic composition also falls. At the same time, cost prices fall, essentially as a result of the massive compression of wages; surplus value – capital’s oxygen – reappears, and slowly reanimates the whole body of capitalism. The economists of the liberal school once again celebrate the merits of the system’s anti-toxins and its “spontaneous reactions”, the rate of profit rises again and becomes more “interesting”; in short, enterprises return to profitability. Accumulation is reborn, sharpening the capitalist appetite and preparing the explosion of new over-production. The mass of accumulated surplus value grows, demanding new outlets, until the moment when the market once again acts as a brake on the development of production. The crisis is ripe. The cycle begins again.

Crises appear as a means of sharpening and unleashing anew the fires of capitalist development” (R. Luxemburg).

Mitchell (to be continued)

1 Mitchell was a member of the minority in the Belgian Ligue des Communistes Internationalistes, and by forming the Belgian Fraction in 1937 took part, with Bilan, in the foundation of the Communist Left.

2 Manifesto of the founding congress of the Communist International.

3 Member of the Belgian government of the day, who gave his name to the “De Man Plan”.



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Texts of the Italian Fraction