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Socialist Party of Great Britain - Capitalism In Crisis - Is Another Economic Crisis Coming?

Is Another Economic Crisis Coming?

Is capitalism heading towards another economic crisis? The media are full of stories of impending gloom and despondency. The stock markets have lost billions of pounds in value. The Chinese economy is contracting, falling oil and steel prices are leading to thousands of job losses and the Eurozone and the so-called Brics economies - Brazil, Russia, India, China and South Africa, the nations that were set to reshape the world economy - are all struggling.

Why the surprise? For socialists the current economic crisis is not an aberration but a consequence of the economic laws that act on commodity production and exchange for profit. Economic crises, trade depressions and periodic high levels of unemployment have been a feature of capitalism for over two hundred years. Despite unemployment falling in the UK there are still 1.68 million officially unemployed (BBC NEWS 20th January 2016)

There was an economic crisis as long ago as 1829. It was described by William Huskisson, a former President of the Board of Trade, in a letter he wrote on December 30th of that year:

I consider the country to be in a most unsatisfactory state, that some great convulsion must soon take place…I hear distress of all the agricultural, the manufactural, the commercial, the West Indian and all trading interests…that no merchant has a legitimate business…I am also told that the whole of London shop-keepers are nearly ruined (HUSKISSON PAPERS, pub. Constable, 1931, page 310).

There was another economic crisis described by Lord Randolph Churchill in a speech in 1884:

We are suffering from a depression of trade extending as far back as 1874, ten years of trade depression, and the most hopeful either among our capitalists or our artisans can discover no signs of revival…Turn your eyes where you will, survey any branch of British industry you like, you will find signs of mortal disease (LORD RANDOLPH CHURCHILL by Winston Churchill, M. P., pub. Macmillan & Co Ltd, London, 1906, Vol 1, page 291).

Randolph Churchill was right to be pessimistic, for the depression, known in textbooks as the great Depression; “lasted for about twenty years” (see “INDUSTRIAL RELATIONS HANDBOOK” 1944, Page 4).

However, economic crises are not natural, like an earthquake or a volcano, but are economic and social. They are features of capitalism where production and distribution take place for profit and where the means of production are owned by a minority capitalist class to the exclusion of a working class majority.

Not that politicians and their economic advisors can do anything about preventing the trade cycle taking its course from economic crisis, to trade depression to up-turn and boom. They can’t.

Each generation claims to have produced a saviour of capitalism - a Lord Keynes, a Milton Friedman or a William Hutton, but they all have feet of clay. Their economic ideas do not stop trade crises occurring but they provide useful political propaganda for the capitalist class and their politicians. The ”saviours of capitalism” turn attention away from the only solution for getting rid of economic crises and periodic high levels of unemployment; the abolition of capitalism and the establishment of socialism.

What then, is the cause of the economic crisis and the trade depression that follows? The crisis is the point at which the fast expansion of production during a boom suddenly stalls. Why does this happen?

The crisis is the point at which the fast expansion of commodity production during a boom suddenly stalls. Why does this happen? Marx dealt with it in CAPITAL VOLUME I, Chapter III, Section 2. A French economist, J. B. Say, had argued that a serious depression could not happen because “every seller brings a buyer to the market”.

By this Say meant that any capitalist who sells commodities thereby obtains money in payment for them and is then in a position to go out at once and buy other commodities thus keeping industry busy.

However, as Marx pointed out, “…no one is forthwith bound to purchase because he has just sold”.

He may choose not to do so, and if the interval between the sale and purchase is too great, the result is a “crisis”.

So why should the capitalists, at some times, stop buying the commodities they had been buying, and leave them unsold in the market? It has to be remembered that the capitalist as capitalist does not just buy for his own consumption.

The capitalist buys raw materials and hires workers to turn these materials into finished products for the purpose of making a profit. If his particular market is swamped by overproduction, the prospect of profit vanishes and the capitalist then curbs production, and stands off workers, thus building up the depression.

This “overproduction” in particular markets is inevitable from time to time, one reason being that:

…the capitalist mode of production has a tendency to develop the productive forces absolutely –regardless of value, and of the surplus value contained in it and regardless of the social conditions under which capitalist production takes place (CAPITAL VOL III, Page 292)

Marx called this overproduction in particular markets “disproportion”. After making an assumption about the economy and disregarding price fluctuations, sham transactions and speculation, he said that a crisis could only be explained:

…as a result of a disproportion of production in various branches, and the disproportion of the consumption of the capitalists and the accumulation of their capitals” (CAPITAL, VOL. III Page 568)

Marx, after a long study of the development of industry in Britain, made a valuable summary of the cycle of boom and depression:

The life of modern industry becomes a series of periods of moderate activity, prosperity, overproduction, crisis and stagnation…Except in the periods of prosperity, there rages, between the capitalists the most furious conflict for the share of each in the market (CAPITAL, VOLUME 1. Kerr Edition, Page 495).

Marx’s study of crises, developed across the three volumes of CAPITAL and in THEORIES OF SURPLUS VALUE, provides a valid account of the process of capital accumulation and the contradictions and problems that periodically occur. Marx showed the working class were exploited and had no interest in the retention of capitalism. The profit system could never be made to work in the interest of the workers.

Nor did Marx believe capitalism would ever collapse. In THEORIES OF SURPLUS VALUE he wrote: "there are no permanent crises” (Volume 2, Part 2, p. 269).

For the working class there is no escape from the problems created by capitalism, like unemployment, except through a socialist revolution. And the socialist revolution is not dependent on an economic crisis. No matter where capitalism happens to be in the trade cycle the working class has no alternative but to consciously, democratically and politically organise to replace the profit system with socialism.

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