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.
Section 6: The Long Cycle and Historical Trends
The question of whether, in addition to the industrial cycle of more or less ten years’ duration, there is a longer cycle extending over several “10-year” cycles has divided Marxists as well as bourgeois economists who have shown interest in business cycles.
Some economists, both Marxist and bourgeois, have held that in addition to the 10-year industrial cycle that I have been examining, there are other economic cycles of varying lengths that can be traced in the history of the world capitalist economy. Especially controversial has been the proposal that capitalist production is characterized by a “long cycle” that extends over periods as long as 50 or even 60 years.
Other Marxists and bourgeois economists have denied that there is any evidence to support the existence of a long cycle. The quasi-regular fluctuations of business conditions over 10-year periods are called a cycle because each phase of the cycle leads, of necessity, to the next phase. I examined this in detail in the chapters on an ideal industrial cycle. But what would be the mechanism of a longer cycle as opposed to the mechanism of the 10-year industrial cycle?
Boom-dominated versus crisis/depression-dominated cycles
Individual industrial cycles differ from each other in many ways. Indeed, no two are exactly alike. Booms dominate some industrial cycles. After a short recession, a rapid recovery leads to a prolonged boom. Over a 10-year life of such a cycle, there might be two years of recession and depression, followed by eight years of prosperity accompanied by lesser fluctuations.
Other 10-year cycles have been marked by prolonged crises and/or prolonged depressions. In these crisis/depression cycles, there are only a few years of real “prosperity.” (1) The most extreme depression-dominated cycle was the 1930s Great Depression, which saw the crisis or “recession” of 1929-33 and the relatively brief “recession” of 1937-38, which was, however, extremely violent in the United States, where it originated. (2) In the United States, the leading capitalist country, official double-digit unemployment lingered through 1940, and official unemployment was still close to double-digit figures as late as 1941! (3)
Why was the industrial cycle of the 1930s so radically different from all the other industrial cycles in the history of capital?
Another example that is hard to fit into a simple 10-year cycle scheme is the stagflationary crisis of the 1970s. That decade did not see a full 10-year industrial cycle but rather a rapid succession of brief, highly inflationary boomlets and the violent recession of 1974-75. This was quickly followed by the more prolonged economic crisis of 1979-82, which saw the brief recession of 1980, the aborted recovery of 1980-81, and the longer deep recession of 1981-82. The decade began with the milder recession of 1969-70, which followed the collapse of the “gold pool” in March 1968. (4)
If we count the 1980 and 1981-82 downturns as representing two separate “recessions,” over the 14 years that followed the collapse of the gold pool, there were four recessions. This is in sharp contrast to the 1960-68 period, which preceded the collapse of the gold pool, and the decades of the 1980s and 1990s, which followed the stagflation decade. Indeed, in retrospect, the entire 14-year period from 1968 to 1982 appears as one long-drawn-out economic crisis with fluctuations within it.
Can such extraordinary episodes as the Great Depression of 1929-40 and the 1968-1982 stagflation be described as the operation of some sort of long capitalist economic cycle? Assuming such a cycle exists, the Depression of the 1930s and the 1968-1982 stagflation would be “recessions” in the long cycle. In contrast, the years of prosperity that stretched from right after World War II to 1968 and the “Great Moderation” that lasted from 1983 to 2007 would represent the “prosperity phase” of the long cycle. (5)
The post-2007-09 depression would likely represent the first stage of a new “recession” in the long cycle that would be expected to last at least a decade and perhaps considerably longer.
But what is the cyclical mechanism in the long cycles, assuming they exist? And if there is no long cycle, what were the non-cyclical causes of the Depression of the 1930s and the stagflation of the 1970s? (6)
The following chapters will address these and other questions relating to long economic cycles or waves.
(1) An example would be the industrial cycles between the panic of 1873 and 1896. This period became known as the “Great Depression,” not to be confused with the later Great Depression of the 1930s. It was characterized by a strong secular downward movement of the general price level.
While there were periods of rising prices, they were much shorter than those of falling prices. Each successive peak in prices was lower than the previous peak, while each trough in prices was lower than the previous trough. This trend decisively reversed itself after the price trough of 1896. Supporters of the long cycle consider this period an example of a downturn in the long cycle.
Economic statistics on industrial production are pretty scanty for this period, so it is debatable to what extent the falling prices coincide with actual downturns in industrial production. The opponents of long cycles claim that though prices generally fell during the “Great Depression” of 1873-1896, industrial production and economic growth in general advanced rapidly in many countries during this period — for example, in the United States and Germany. Those economic historians who play down the significance of the earlier “Great Depression” also claim it was marked by a strong rising trend in real wages in Britain. However, it is widely admitted that U.S. farmers were hard-pressed by the general falling prices of agricultural commodities and high debts that had to be paid in a currency of rising purchasing power during those decades. (back)
(2) I will examine this recession closely in a later chapter. (back)
(3) During the Depression in the 1930s, workers in the United States employed on public works projects were counted as unemployed. Today, they would be considered employed. So if the rate of unemployment during the Depression in the United States were calculated by today’s methods, unemployment during those years would be considerably lower than the figures that are given in history textbooks and much closer to the official unemployment figures that prevail today. (back)
(4) A strong case can be made that the prolonged economic crisis of the 1970s, which some long-cycle supporters see as representing a downturn in the long cycle, began with the collapse of the gold pool in March 1968. (back)
(5) It has also been proposed that the “mid-Victorian boom” that set in immediately after the revolutions of 1848 and lasted until the panic of 1873 represented an “expansion” phase of the long cycle, while the 1873-1896 “Great Depression” represented a downturn in the long cycle following the mid-Victorian boom phase. I will examine this episode in the coming chapters. (back)
(6) Or, if we want to go back to the 19th century, if there is no long cycle, what caused the “mid-Victorian boom” of 1848-1873, and why was it followed by the “Great Depression” of 1873-1896? (back)
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