The Phases of the Industrial Cycle (pt. 3)

The real industrial boom begins

The boom phase of the industrial cycle is of particular interest for crisis theory. It is only during the boom that capitalist expanded reproduction develops with full vigor. Therefore, it is the boom that develops the contradictions inherent in capitalist production to the point where they can only be resolved—only temporarily as long as capitalist production is retained—by a crisis.

I explained in the last post that during the phase of average prosperity, excess capacity is whittled away at both ends, so to speak, by the closing down of factories that will never again be profitable, and the reopening of factories and machinery that after write-downs can once again yield to the industrial capitalists the average rate of profit.

As the margin of excess capacity shrinks, the percentage of industry that is lying idle is reduced to such an extent that the industrial capitalists are forced to undertake massive investments in new factories packed with state-of-the-art machinery. The industrial capitalists do not want to see their margin of excess capacity shrink to zero. They want to maintain a certain margin of excess capacity so production can be quickly increased to meet any sudden rise in demand.

The Phases of the Industrial Cycle (pt. 2)

How recessions end

During recessions, inventories—commodity capital—are run down as production declines faster than sales. At some point, therefore, industrial production will begin to rise, because the industrial capitalists have to rebuild their inventories. This is why all recessions eventually end.

The recovery begins first in Department II—the department that produces the means of personal consumption. The contraction in industrial employment more or less comes to a halt once rising industrial production caused by the need to rebuild inventories begins.

However, industrial employment rises very little during the first phase of the upturn. Many factories during the recession were forced to operate at levels far below their optimum level of productivity. As inventory rebuilding proceeds, more factories come closer to their optimum utilization levels. The resulting surge in productivity enables the bosses to increase production considerably while adding few, if any, workers. Therefore, for a considerable period of time after the recession proper ends, labor market conditions continue to favor the industrial capitalists over the workers. This remains true after the rise in the rate of unemployment begins to taper off.