From Crisis to Boom

The capitalist industrial cycle consists of four major phases: crisis, stagnation, average prosperity, and boom.

Concrete and Abstract Industrial Cycles

Section 3: Industrial Cycles

No two industrial cycles are alike, just as no two snowflakes are identical. Each industrial cycle is shaped by numerous non-cyclical factors, including technological, political, and military influences, as well as the discovery of new natural resources unique to that cycle.

Profit and Interest

Chapter 9: Profit and Interest

Some assumptions made in this chapter

In the last chapter, I indicated that when I examine the industrial cycle proper, I will assume initially that only metallic money and credit money exist and bring in token money at a later stage—that is, I will assume a gold standard.

However, in this chapter, it is more useful to assume the existence of not only metallic and credit money but also token-paper money. Here I will assume a paper money system and not the gold standard. The reason is that the laws determining the interest rate only find their full expression under a token money standard.

How money emerges out of the simple exchanges of commodities

Chapter 7: How money emerges out of the simple exchanges of commodities

In Chapter I, Volume I of Capital, Marx presents the following equation of exchange: 20 yards of linen = one coat

For example, say I have produced 20 yards of linen. Under the prevailing conditions of exchange, I can barter the 20 yards of linen for exactly one coat of a given type. The equal sign assumes that, in some sense, 20 yards of linen are the same as one coat. But exactly what is being equated here?

Do crises originate in the real or the monetary economy?

Section 2: The Form of Value — Money

Introduction: Do crises originate in the real or the monetary economy?

In the wake of the Great Depression, progressive economists played down the importance of monetary policy as opposed to fiscal policy. Instead, the progressive economists of the New Deal and post-New Deal eras saw the source of capitalist economic instability in either the instability of private investment or its chronic insufficiency. Progressives gave little weight to the importance of what is called monetary policy – the policies of the central bank. Instead, progressive economists emphasized the importance of fiscal policy. Fiscal policy refers to the central government’s taxation, spending, and borrowing policies. This view is supported by the belief that economic crises such as the one that led to the Great Depression arise in the sphere of production and not in circulation.

Expanded Reproduction

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.

Disproportionality

Chapter 5: Disproportionality

Disproportionality was a popular crisis theory among Marxists of the Second International era that preceded World War I — from Engels’ death in 1895 to 1914. It is less popular among Marxists today, at least judging from the Internet, where the seemingly incompatible “not enough” surplus value or “too much” surplus value/underconsumptionist theories are fighting it out.

Production and Reproduction

Chapter 4: Production and Reproduction

The capitalist mode of production and, indeed, all economic systems involve not only production but reproduction. What is the difference between production and reproduction? Let’s take any factory — for example, a garment shop that specializes in belt production. In order to produce the belts, the boss — industrial capitalist — needs workers, a building, raw materials in the form of leather, electricity to run the shop’s machines and provide lighting, and so on. The industrial capitalist then must combine these forces of production to produce the belts. This is an example of production.

The Falling Rate of Profit

Chapter 3: The Falling Rate of Profit

Is the Falling Rate of Profit the Key to Periodic Economic Crises?

Among Marxists today, the tendency of the rate of profit to fall is perhaps the most popular explanation for capitalism’s cyclical economic crises, with underconsumption a distant second. In its more naive forms, this theory leaves out the question of realizing surplus value altogether.

Profit Squeeze

Chapter 2: Profit Squeeze

Basic formula of capitalist production

The basic formula of capitalist production is M—C…P…C’—M’. (1 ) Industrial capitalists begin with a sum of money M. They must then find on the market the elements of productive capital — both constant capital (factory buildings, machinery, and raw and auxiliary materials) and variable capital (labor power), the only commodity that produces surplus value. The productive capital, both constant and variable, is represented by C.