A Marxist Guide to Capitalist Crises
“A Marxist Guide to Capitalist Crises,” an eBook created from the key posts on the Critique of Crisis Theory blog, is currently in production. We’ll be sharing the completed chapters between our regular postings.
Chapter 6
Expanded Reproduction
According to Marx, the capitalist mode of production can, in the long run, exist only as a system of expanded reproduction. However, expanded reproduction can only take place if certain proportions are maintained between Department I, which produces the means of production, and Department II, which produces the means of (personal) consumption. These proportions must be maintained in terms of both use value and value.
Marx’s basic assumptions
Marx developed his tables of expanded reproduction in Volume II of Capital from the tables of simple reproduction. As with simple reproduction, Marx assumed that society consists of only two classes: industrial capitalists and productive of surplus value workers. As was the case with the tables of simple reproduction, the rate of surplus value is 100 percent. The workers work half the time for themselves and half the time for the industrial capitalists.
The tables of expanded reproduction deal only with the capital used up in the annual reproduction process plus the newly accumulated capital. The ratio of 5/6th constant capital to 1/6th variable capital is preserved. In the tables, the capitalist economy is allowed to grow in size but remains qualitatively unchanged. We have a dynamic equilibrium of economic growth. Marx assumes that half the surplus value is transformed into new capital — that is, capitalized. The other half is consumed unproductively by the capitalists.
Here is a big difference between expanded and simple reproduction. In simple reproduction, the capitalists consume all the surplus value unproductively. The existing capital is reproduced, but there is no accumulation. In the tables of expanded reproduction, Marx introduced accumulation of capital in the framework of reproduction. He developed the following set of equations. The first equation represents Department I and the second Department II. (1)
5,000Ic + 1,000Iv + 1,000Is = 7,000
1,430IIc + 285IIc + 285IIs = 2,000
Let’s start with Department I. There is 5,000 worth of constant capital consumed and 1,000 worth of variable capital. Since the rate of surplus value is 100 percent, the surplus value is also 1,000. Adding these numbers together, we get a total annual output of 7,000 means of production. Half of the surplus value of 1,000 will be accumulated, transformed into new capital during the next annual cycle, and half will be consumed unproductively by the capitalists.
The second equation represents the production of Department II, the means of consumption. The constant capital that will have to be replaced is 1,430, the variable capital is 285, and the surplus value is 285.
To preserve the existing ratio of constant to variable capital required by his method, Marx had 5/6th of the newly created capital in Department I (5/6 x 500) transformed into constant capital and (1/6 x 500) accumulated as new variable capital. This comes to about 417 new constant capital and 83 in new variable capital.
Since only variable capital produces surplus value and the rate of surplus value is 100 percent, the surplus value produced by Department I will rise in the next annual reproduction cycle from 1,000 to 1,083. This calculation is straightforward. The real problem is, how much does Department II have to increase its production to maintain the conditions of expanded reproduction?
Now, the 5/6th of the 500 in surplus value to be converted into new constant capital remains within Department I. That leaves 1/6th of 500 of the surplus value accumulated by Department I as additional variable capital. This comes to 83 in new variable capital. However, this new potential variable capital is made up of commodities whose material use values consist of means of production.
The workers of Department I cannot be paid in means of production; they must be paid in means of consumption. To obtain the necessary means of consumption, Department I must enter into exchange with Department II. The problem that must be solved is how much does the constant capital of Department II have to expand to maintain the equilibrium between Department I and Department II. The key to the solution is the equation cII = vI + sI. Simple reproduction is contained within expanded reproduction.
The second equation, which represents the production of the means of consumption, has 1,430 of constant capital; 285 of variable capital; (2) and, since the rate of surplus value is 100 percent; 285 in surplus value. We, therefore, have a total annual production of 2,000 means of consumption before expanded reproduction begins.
Notice that IIc has a value of 1,430. However, Iv has a value of 1,000 and Is also 1,000. Now, here is where simple reproduction is contained within the expanded reproduction. Following Marx’s assumption, divide 1,000 by two to get half of what is consumed unproductively by the capitalists of Department I. Remember, the entire output of Department I consists of use values that are totally unsuitable for personal consumption.
Here, we notice an inequality. Department I is overproducing by 70 relative to the needs of simple reproduction, as illustrated by the expression 1,430cII < 1,000vI + 500sI. Department I needs an additional 70 in terms of means of personal or unproductive consumption for the capitalists of Department I. Department I will also need an additional 83 in terms of means of consumption — wages — for the additional workers it must hire.
But before the exchange takes place with Department II, the 83 exist only in the form of means of production totally unsuitable for consumption by the newly hired workers of Department I. So, Department I will need a total of 70 (increased unproductive consumption for the capitalists of I) + 83 (for wages for newly hired workers of I) in consumer goods. To meet this additional demand for consumer goods from Department I, Department II must, in the next annual cycle of reproduction, increase from 1,430 to 1,583.
So in the next year — or whatever the reproduction period is — cII has to rise from 1,430 to 1,583. Now, what about the next term in the second equation, 285vII? Like in Department I, there is 5/6th constant capital for every 1/6th variable capital. To maintain this ratio, Marx calculated 20 percent of 1583 (1/6th is 20 percent of 5/6th), which he rounded down to 316.
The additional variable capital (316 – 285), or 31, is deducted from sII just like the additional 153 in cII is. Since the rate of surplus value is 100 percent, this means that sII will also be 316 in the next reproduction cycle. Therefore, production of means of consumption must rise from 2,000 to 2,215 (2,000 + 153 + 31 + 31).
Marx continued the calculation through year — or production period — four, the results of which are reproduced below.
Year 2: 5,417c + 1,083v + 1,083s = 7,583 and 1,583c + 316v + 316s = 2,215
Year 3: 5,869c + 1,173v + 1,173s = 8,215 and 1,715c + 342v + 342s = 2,399
Year 4: 6,358c + 1,271v + 1,271s = 8,900 and 1,858c + 371v + 371s = 2,600
As previously indicated, Marx kept the organic composition unchanged in the above calculations. If we add a rise in the organic composition of capital, certain basic laws of motion of capitalist production arise.
If vI is allowed to grow more slowly in percentage terms compared to cI, which will be the case if the organic composition of capital is rising in Department I, all other things remaining equal, cII will also have to grow more slowly if the proportionality between Departments I and II is to be maintained. A rising organic composition of capital means a fall in the rate of profit, the rate of surplus value remaining unchanged.
Since the organic composition of capital can be expected to rise over time, we would expect that Department I — the production of means of production — will grow faster than Department II — the production of means of consumption — and the rate of profit will fall assuming the rate of surplus value remains unchanged.
For reasons of method, Marx did not extend his tables in Volume II to illustrate these laws. He didn’t introduce the tendency of the rate of profit to fall based on the rise in the organic composition of capital until Volume III.
Only after he had written Volume III could Marx have produced tables that would illustrate expanded reproduction with a rising organic composition if he was to remain true to his method. As far as is known, Marx never actually developed tables illustrating expanded capitalist reproduction with a rising organic composition of capital. However, he provided future generations of Marxists with all the necessary tools to do so.
The tables of expanded reproduction and crisis theory
As with the case of simple reproduction, if things are to proceed smoothly, proportionality must be maintained in both value and use-value terms. There are plenty of opportunities for things to go wrong here and for crises of various types to develop in the reproduction process. Since capitalist production is not planned production but develops through competition and anarchy, such crises and disturbances are not only possible but inevitable.
Money and expanded reproduction
Again, the great majority of Marxists who have dealt with reproduction, whether simple, expanded with an unchanged organic composition, or expanded with a rising organic composition of capital and a falling rate of profit, have ignored the question of money. As we have seen before, as long as we abstract money, we remain stuck in the world of Say’s law. There can be no general overproduction of commodities.
We can have an overproduction in Department I relative to Department II or an overproduction in Department II relative to Department I. But as long as we leave out money, we cannot have a general overproduction of commodities in both Department I and Department II.
For example, Department II might consume the value of its fixed capital for a while at a rate faster than Department I is producing replacement fixed capital. This is possible because, while the value of fixed capital is steadily consumed more or less, the use value of the fixed capital must be replaced all at once. Therefore, if Department II consumes the value of fixed capital at a pace faster than Department I can replace its value and use value; the point will be reached where Department II will find it is unable to fully replace its used-up fixed capital, let alone expand it. This would certainly produce a crisis in the reproduction process.
But this crisis would not be a crisis of generalized overproduction. Rather, it would be a crisis of the underproduction of elements of fixed capital relative to the demand for fixed capital from Department II. This would cause production to fall in Department II as the fixed capital of Department II physically wears out — that is, Department II would have overproduced relative to its supplier, Department I. This is the sort of crisis allowed by Say’s law.
Marx, however, did not abstract money. In the case of simple reproduction, Marx assumed that the gold-producing and refining industries produced just enough gold to replace the gold that was lost due to the wear and tear of the circulating gold coinage. With expanded reproduction, this level of gold production would not be sufficient. It would be necessary — using Marx’s assumption that currency consists only of full-weight gold coins — that the annual gold production not only cover the replacement of the wear and tear of circulating gold coins but additional gold must be produced — after deducting the rising quantity of gold that is used for non-monetary purposes — to circulate the rising quantity of commodities produced in both Department I and Department II.
This would be true unless there is a preexisting surplus of gold coins on hand — a reserve fund. Even in this case, expanded reproduction would sooner or later require the production of additional gold for coins once the surplus gold coins have been fully absorbed into circulation as expanded reproduction continues.
Today, gold coin currency is largely limited to underworld or illegal transactions. In modern capitalism, bank-created credit money — checkbook money based on the legal-tender paper currency created by the monetary authorities known as central banks — functions as the circulating media. This was largely true even in Marx’s time, though gold coin currency played a considerably larger role than is the case today.
In modern currency systems, it seems that the state and its “monetary authority,” along with the commercial banks, always create enough currency to ensure that the needs of expanded reproduction for additional means of circulation can be fully met.
Therefore most later Marxists simply abstract the question of the production of money material when dealing with either simple or expanded reproduction. Before we can answer the question of whether we can ignore the question of the production of money material when dealing with expanded capitalist reproduction, we will have to examine Marx’s theory of money and currency, which is found not in Volume II of Capital but at the very beginning of Volume I. This will be the subject of the following chapters.
Expanded reproduction and the evolution of Social Democracy
As the Marxist movement gradually assimilated Volume II of Capital in the early years of the last century, crisis theories based on disproportionalities between the two departments of production became widespread. This was the era of the Second International before World War I and the Russian Revolution. In this era, virtually all Marxists, including Vladimir Ilyich Lenin and other future leaders of the Russian Revolution, called themselves “Social Democrats.”
Unlike in the years after the Russian Revolution, the term Social Democrat did not necessarily mean reformist. In those years, while some Social Democrats were indeed reformists, others like Lenin and Rosa Luxemburg, active in both the Polish and German Social Democratic movements, were revolutionaries – communists in later terminology. In addition to the revolutionary wing on the left, represented by Lenin and Luxemburg, on the right were “revisionists” such as the German Social Democrat Edward Bernstein, who was already openly reformist. A broad “center” also wavered between the two poles. This center, which included such figures as Karl Kautsky, Rudolf Hilferding, and Otto Bauer, made valuable contributions to Marxist theory, especially in the field of economics, but tended toward reformism in practice.
This period, outside of Russia, was not yet revolutionary. In Western Europe, as well as the United States, these years were somewhat like the first 25 years after World War II, when great capitalist prosperity prevailed. In addition, monopoly capitalism/imperialism, with its super-exploitation of the rest of the world, had become dominant. Consequently, revolution did not seem to be on the immediate agenda.
Prosperity meant that there was a great and growing demand for the commodity labor power. This encouraged the rapid growth of the workers’ movement in Western Europe and, to a lesser extent, even in the United States, both at the labor union level and the level of the Social Democratic parties of the Second International. These parties were making great gains in elections, and a Social Democratic majority in the German Reichstag, or parliament, seemed to be only a matter of time.
The “progressive” but not revolutionary political atmosphere in the regions lying to the west of the czar’s empire encouraged both the development of Marxist theory on one hand and reformist practice on the other. These were the conditions that gave rise to the centrist current in the international Social Democracy.
It is true that disproportionalities between the departments of production — as well as disproportionalities within them — can give rise to crises of various kinds. However, such crises can be seen as mere accidents. Therefore, the more reformist-leaning Social Democratic theoreticians held out the hope that as capitalism became more “organized” through the growing power of the banks, trusts, and cartels, the anarchy of production that marks capitalism would grow less intense.
The result would be, the reformists hoped, that crises would become milder as capitalism was gradually transformed into a planned economy through a process of evolution, not revolution. This, combined with the growth in the power of parliaments and the growing number of Social Democrats elected to parliaments, would mark a gradual evolutionary transition from rule by the exploiting capitalist minority to the socialist working-class majority. Like capitalist exploitation itself and ignoring the growing super-exploitation of the oppressed countries, the reformists expected that crises, wars, and revolutionary uprisings would simply fade away.
Marx’s reproduction formulas and the breakdown theory
As explained above, Marx carried out his calculations over four periods of expanded reproduction. But, in principle, the reproduction formulas can be continued to infinity as long as the rules of expanded reproduction are adhered to. Here, capitalism appears as an economic system without limits, even if accidental disproportions result in crises along the way.
The reformists within and around international Social Democracy were delighted. They thought they had won a great victory over the revolutionary wing of the Social Democracy with the help of Marx himself! The reformists believed that Marx had proved that capitalism could, in theory, last forever! And he had done so in a much more convincing way than the bourgeois economists themselves!
In this period, tendencies arose within Russian Marxism influenced by the reformist and centrist currents west of the Russian Empire. The first Russian Marxists had split with the Russian Populists on the issue of whether capitalism could develop at all in Russia.
The Russian Marxists used Marx’s reproduction tables to prove that capitalism could and indeed would develop in Russia. As long as the proper proportions were maintained between Department I and Department II, all the value and surplus value produced by the capitalist economy could be realized. The problem of adequate markets — though perhaps not entirely without frictions and the occasional crisis — would be solved by maintaining the correct proportions between Department I and Department II. As capitalist industry continued to grow in Russia and capitalist relations spread in agriculture, the Russian Marxists felt vindicated.
The Marxist majority of Russian Social Democracy in those years, though divided on other questions, did not believe that Russia was on the eve of a socialist revolution but instead a bourgeois democratic revolution. The revolution approaching in Russia would sweep away the czarist autocracy and feudalism and thus provide far better conditions for the further development of Russian capitalism and the development of the workers’ movement. Only after Russian capitalism had reached a high degree of development would the transition to socialism in Russia be on the agenda.
Bourgeois Russian Marxism
Marx, therefore, appealed not only to early representatives of the Russian proletariat but also to certain representatives of the rising bourgeoisie. These bourgeois Russian Marxists converted Marx into a prophet of capitalism. (3) Many representatives of the developing bourgeois Russian intelligentsia believed Marx had proven in Volume II of Capital that capitalism could expand without limit. Hadn’t Marx shown that markets would not be a problem as long as the correct proportions of production were maintained? And that the correct proportions of production would arise through the normal process of capitalist competition?
Though there would be inevitable crises along the way, the bourgeois “Marxists” argued, in the long run, the limits of the market were the same as the limits of production. Though Russia’s capitalist development was belated relative to that of Western Europe, the U.S., and even Japan, that would not be a problem. There would be plenty of markets to go around for all the capitalists, both old and new.
These bourgeois Russian Marxists were sometimes called “legal Marxists” since they adapted to czarist legality. Mikhail Tugan-Baranovsky, a liberal Ukrainian economist who was close to Russian legal — or bourgeois — Marxism, used Marx’s reproduction tables to prove that capitalism in general and Russian capitalism, in particular, had a bright future ahead of it. It didn’t matter how much capitalism expanded or even how high the organic composition of capital rose as long as the right proportions were maintained between Departments I and II. Just as Say and Ricardo had explained a century before, supply would create its own demand.
Rosa Luxemburg sounds the alarm
Rosa Luxemburg was alarmed. In her struggle against the German “revisionists,” Luxemburg had depended heavily on a view widely shared in the early German Social Democracy that capitalism had a built-in tendency toward economic collapse. In Reform or Revolution, Luxemburg had foreseen a declining phase of capitalism that would set in when the ability of the world market to expand was finally exhausted.
Reform or Revolution, the first edition published in 1898, was written during a lull in worldwide capitalist crises. Luxemburg pointed out that the early crises — the ones from 1825 to 1866 plus the Panic of 1873 — had been preceded by major expansions of the world market. But she predicted the crises that would mark the declining phase of capitalism would occur against the background of a world market that would increasingly be losing its ability for further expansion.
As time passed, the new markets that the capitalists needed would become fewer and fewer. When Reform or Revolution was published, Luxemburg and the Social Democrats outside Russia were largely unaware of the reproduction tables in Volume II of Capital. But when Luxemburg did become aware of them, she was indeed alarmed.
Marx himself emphasized that no social order disappears until it has fully developed the productive forces that it was adequate for. For example, feudalism didn’t give way to capitalism because capitalism was a “better,” more democratic, and “just” system. It died because the productive forces arising from the late Middle Ages onward could less and less be confined within the narrow limits set by feudal agriculture and guild production.
The tendency of the rate of profit to fall and the historical limits of capitalism
But didn’t the fall in the rate of profit brought about by the rise in the organic composition of capital prove that capitalism would eventually have to give way to socialism? Luxemburg was not convinced by this argument.
As we have seen, the fall in the rate of profit is accompanied by a rise in the mass of profit. Capitalists are compensated for the fall in the rate of profit by the growth in the size of their capitals. Despite the fall of the rate of profit, profits appropriated by the capitalist class keep growing. Luxemburg didn’t see how the fall in the rate of profit would lead to the end of capitalism before, as she put it, “the sun burned out.”
In her Accumulation of Capital, first published in 1913, Luxemburg tried to find a flaw in Marx’s tables of expanded reproduction. She claimed in the Accumulation of Capital that she had proven that expanded reproduction could not take place in a closed system where every person was either an industrial capitalist or a productive worker. These, remember, were indeed Marx’s assumptions in both his tables of simple and expanded reproduction.
Expanded capitalist reproduction, Luxemburg held, was only possible because of the existence of simple commodity production, which existed side by side with the capitalist system. As simple commodity production continued to decline, it would be only a matter of time before the world market would indeed be exhausted, just as she had assumed in Reform and Revolution. Capitalism would then have reached the point where all the productive forces that are adequate for it had been developed. The material basis would have then been fully laid for the inevitable transition to socialism.
Few of her fellow Marxists, including most famously Lenin, (4) found her arguments convincing. This seemed to leave the fall in the rate of profit as the only built-in barrier to capitalism’s ability to develop the productive forces after all. But then what would prevent capitalism from lasting until “the sun burned out”?
The centrist Social Democrat Otto Bauer offered his own tables of expanded reproduction. His tables featured a rising organic composition of capital and a fall in the rate of profit. Like Marx, Bauer’s tables covered four periods of reproduction. During these four periods, Department I grows faster than Department II, and the rate of profit falls. Yet the rate of accumulation of variable capital and with it full employment is maintained.
Bauer accomplished this by having his capitalists gradually increase the part of the surplus value that is accumulated compared to the part that is consumed unproductively. This seemed to prove that the gradual fall in the rate of profit that would be expected as the organic composition gradually increased would never lead to the collapse of capitalism.
The ink of Luxemburg’s Accumulation of Capital had barely dried before World War I broke out. Three years later, revolution broke out in Russia, and contrary to the expectations of virtually all Russian and Western Marxists — with the exception of Leon Trotsky (5) — a revolution brought the working class to power, and the Russian Revolution assumed a socialist character.
For a while, it looked as though the Russian Revolution would sweep throughout Europe and beyond. Workers’ soviets — soviet is Russian for council — covered Germany in 1918. It seemed that Germany would supplement the Russian Revolution with a powerful revolution of its own. Unlike in Russia, in Germany with its highly developed and centralized industry, conditions were far more favorable for the establishment of a socialist society. Under these conditions, the whole breakdown controversy raised by Rosa Luxemburg seemed rather academic.
But after 1923, European capitalism seemed to be entering into a new stage of stabilization. The following year, Nikolai Bukharin, then considered the leading theoretician of the now-ruling Soviet Communist Party and the Communist International, launched a renewed attack on Luxemburg’s “breakdown theory.”
Due to the failure of the German revolution to materialize in 1923 despite the French occupation of the Ruhr — Germany’s industrial heartland — and the accompanying infamous hyperinflation that year, reaction was in the air not only in Germany but within the Soviet Republic. In 1924, Joseph Stalin declared the policy of “socialism in one country” with the support of Bukharin. Indeed, some sources credit Bukharin with originating this slogan, which was to become closely associated with Stalin’s name. In this context, Bukharin launched his attack on Rosa Luxemburg’s breakdown theory.
Like earlier Russian Marxists, including Lenin, Bukharin believed that a pure capitalist society consisting only of capitalists and workers would be able to fully realize the value and the surplus value of the commodities it produced as long as the correct proportions of production were maintained.
In 1929, however — which happened to be the year that the super-crisis of 1929-33, the Great Depression, began — Henryk Grossman reopened the breakdown debate. Though obviously very sympathetic to Rosa Luxemburg’s attempts to prove that capitalism had an objective economic limit, Grossman agreed that her attempt to prove it in The Accumulation of Capital had failed. However, Grossman did not accept Luxemburg’s claim that the tendency of the rate of profit to fall was no threat to the existence of capitalism — at least before the “sun burned out.”
He did this by simply extending Bauer’s reproduction tables, which appeared to show that capitalist expanded reproduction could go on forever, even in the face of a rising organic composition of capital and a falling rate of profit. Grossman showed, on the contrary, that Bauer tables would indeed break down if the calculation were extended for a sufficient number of cycles. The breakdown controversy was reopened.
Before we can return to the “breakdown” question raised by Luxemburg and Grossman, we have to complete the analysis of capitalist reproduction, both simple and expanded. We have to examine what Marx called the independent value form — money. We cannot assume that exchanges between Department I and Department II, or within them, are carried out through barter.
(1) Capital, Volume II, Chapter 21: Accumulation and Reproduction on an Extended Scale, Part 2, III. Schematic Presentation of Accumulation, 2. Second Illustration https://www.marxists.org/archive/marx/works/1885-c2/ch21_02.htm (back)
(2) The sub-department of Department II that produced means of consumption for the workers doesn’t directly produce variable capital. What it does produce is the value that is embodied at first in the means of consumption but then is transferred to the worker’s ability to work when it’s consumed by the workers.
This transfer involves two processes. One involves the ability of the current generation of workers to keep on working. The second allows the current generation of workers to raise a new generation of children who are in the process of forming the labor powers that will produce surplus value in the future. The labor power of the workers becomes variable capital only after it has been sold to the industrial capitalists and put to work, both replacing its own value and, most importantly, from the viewpoint of the capitalists producing surplus value.
However, the value that makes up variable capital is indeed produced by the workers who produce the means of personal consumption destined to be consumed by the (productive of surplus value) workers. (back)
(3) All the great revolutions of history have always appealed to the idealism of the masses of people who are involved in the revolution. They believe that a truly just society — however “just” is imagined in the given epoch — will be realized at last. But capitalism, with its division of society into ultra-rich capitalists and the far more numerous masses of the very poor, is not the type of society that revolutionary-minded people of any epoch would consider a just society. This is where “bourgeois Marxism” stepped in, not only in Russia but in many other countries as well, that passed through bourgeois revolutions over the last century.
The bourgeois Marxists explain that Marxism proves that since the material conditions for a socialist society do not yet exist in a country, they must be created. And the means of creating them, the bourgeois Marxists explain, is capitalism. Therefore, capitalism is the immediate aim of their revolution. That creating the conditions for the growth of capitalism is supposed to be the material foundation for socialism. However, it will take a period of generations before capitalism can create the material foundations for socialism, especially in a “backward” country. Therefore, socialism can’t be realized, they say, until you and your children, maybe even grandchildren, are long dead. Until then, why not enjoy capitalism?
Such “bourgeois Marxism” melts away very rapidly as soon as the working class raises its head, and “way too early” struggles against capitalist exploitation lead to the struggle for socialism in the here and now. (back)
(4) Russian Marxism was born in a country where capitalism was struggling to get established. The main opponents on the left of the early Russian Marxists were the populists. The Russian populist economists attempted to prove that capitalism could never be established there because there would not be sufficient markets. The populist economists pointed out that the world market was already divided between the existing capitalist powers. Russian capitalists might be able to extract surplus value from the working class, but they would never be able to realize it in the form of monetary profit on the market. The Russian Marxists found in Marx’s tables of expanded capitalist reproduction a powerful weapon in their struggle against the populists.
In Germany, where Luxemburg was based, there was no question that a powerful, highly-developed capitalism was possible, and the German capitalists were successfully realizing the surplus value embodied in the commodities that their workers produced. In Germany and other highly developed capitalist countries, the question was not whether capitalism was possible but how long it could last and what, if any, were its ultimate limits. (back)
(5) Leon Trotsky foresaw the possibility that the Russian working class could capture political power in the course of a bourgeois democratic revolution in Russia and would, once in power, be obliged to take socialist measures such as nationalizing the means of production and organizing a planned economy. This is Trotsky’s famous (or in some circles infamous) theory of “permanent revolution.” However, Trotsky never expected the working class could hold power for very long unless the workers of the advanced capitalist countries conquered political power and joined the workers of the former Russian empire in socialist construction. If this did not happen, Trotsky believed socialist construction in backward Russia could not succeed, and capitalism would inevitably return. (back)
A Critique of Crisis Theory 