Crisis of Capitalism

Posted: April 7, 2011 in TANIT-Forum

TANIT Discussions:

3- Capitalist Crisis


From Crisis of Capitalism to Revival of Marxism

In Capital, Karl Marx makes a distinction between “recurrent crises” of capitalism, which are related to business-cycle fluctuations known as “recessions”, to the ones which are called “major crises”. From the late 19th century to present day, four such major crises can be distinguished: the crisis of the 1890s, the Great Depression of 1930s, the crisis of the 1970s, and the current crisis 2007-8.

The fundamental analysis of Karl Marx on the “tendency of the rate of profit to fall”, in the final analysis, is still valid. In spite of this, there is room to consider that in specific moments in circulation of capital, one of these moments can trigger the crisis of capitalism, but does not change the nature of class struggle and does not deny the “tendency of the rate of profit to fall” which may follow as the result of crisis in other moments (this is in accordance with Karl Marx’s view, Capital, Volume 3, chapter 13).

Marx argues in Capital volume 1, that capital is a process (in motion) of circulation and not a static “thing”. To put it simply, capital is fundamentally about putting money into “circulation” to make more money. The primary form of capital circulation in Marx’s view was that of “production of capital”. Capital begins with money which is used to buy “labour power” and “means of production” which are then brought together in a labour process, under a given technological and organisational form, that results in a new commodity to be sold on the market for the initial money plus a profit. (Of course there are various other ways to make money. For example financiers lend money in return for interest, merchants buy cheap in order to sell dear and rentiers buy up land, resources, etc. which they release to others in return for rent and make money).

The next stage of the circulation is that a part of the profit, has to be capitalised and launched into circulation to seek even more profit, by purchasing more “labour power” and “means of production”. This is based on “coercive law of competition” (Capital, Vol.1, Ch. 24). That is, “production” for the sake of “production” in search of more money in competition with other capitalists. Therefore capital is committed to a “compounding rate of growth”. This circulation will go on, on and on (the “concentration of capital” according to Marx).

Generally there are five moments in circulation of capital: 1- Initial Money (capitalist somehow finds and brings the money to market); 2- Labour Power (capitalist purchases labour power by employing the workers); 3- Means of Production (Capitalist buys tools and machinery etc.); 4- Process of Production (at this stage capitalist makes a commodity which can be sold more than its original cost of its production with a given technology- the surplus value from labour power is extracted); 5- Process of reinvestment (The Capitalist with this expanded money has to find a market to re-invest and re-start the circulation- “compounding rate of growth”). This process of circulation goes on, on and on in capitalist mode of production. The “compounding rate of growth” would only stop when there is a major crisis in one of the moments. The rate of growth required for on a world scale to sustain capitalism is an average of 3 % a year.

Capitalist Crisis can be trigged in any moment in this circulation, where the capitalist encounters an obstacle in the circulation process. But it must be made clear that crisis in other moments, to Production moment (rate of profit to fall), is only the effect of triggering the crisis in the Production moment, and on its own is not the cause of crisis. Let us briefly take each moment separately and see what are the causes of the crisis in each moment and how capitalists overcome it.

What happened in 2008 crisis is fall of rate of profit “temporarily for other reasons” than in the moment of production. Therefore the class struggle between two main antagonist classes is decisive and remains important until the total termination of capitalist world order.

Globalization is a  historical processes, typical of capitalism in general. Neoliberalism refers to a phase of capitalism.  “Neoliberal globalization” means “imperialism in the neoliberal era”. Lenin contributed on explaining and updating the meaning of imperialism in his influential pamphlet Imperialism, the Highest Stage of Capitalism in 1916, during the carnage of the First World War. Sometimes, imperialism is defined very broadly to mean the domination of weaker states by stronger ones. But empire building, colonialism and military competition have existed ever since states have existed. By contrast, Lenin’s definition of imperialism was historically specific. For Lenin, imperialism was distinct because it represented–and was the product of–a new stage in the development of capitalism.

But “imperialism” has changed in form since Lenin’s time. Marxist economist Ernest Mandel, developed/updated the understanding of imperialism explaining that  ‘late-stage’ capitalism will be dominated by the machinations – or perhaps better, fluidities – of financial capital. In his work “Late Capitalism”, Mandel argues for three periods in the development of capitalism. First is market capitalism, which occurred from 1700 to 1850 and is characterized largely by the growth of industrial capital in domestic markets. Second is monopoly capitalism, which lasted until approximately 1960, and is characterized by the imperialistic development of international markets as well as the exploitation of colonial territories. Third, is late capitalism, which displays such features as the multinational corporation, globalized markets and labour, mass consumption, and the space of liquid multinational flows of capital.

The recent crisis of capitalism, leads us to revival of Marxism. The revolutionary Marxists, of course, have their vision and perspective of the future and what they wish to achieve. In order to construct this vision there are three interlinked studies and understanding to be achieved. Firstly, the understanding of Capitalism and its crisis (the roots of crisis, trajectory to present, and political conclusions). Secondly, the understanding the future society, that is the “transition from capitalism to socialism”. (the concept of socialism and the role of the state). Thirdly and most importantly, the organisational methods of surmounting and transcending from capitalism to socialism (the concept of revolutionary organisation and its intervention in mass institutions).

The first and second points is characterised by the development of Marxist theories – by returning to Marx (we are witnessing this trend on an international scale). The third point is characterised by construction of “revived avant-garde tendencies” (fundamentally different to traditional so called “Marxist”, “Leninist”, “Trotskyist” organisations which formed the caricature of revolutionary organisation in the past)  by returning to the positive and negative experiences of the Russian Revolution (this process is not obvious to many activists and is counter posed by “neo-utopian socialists”). These three elements form a unity.

7 April 2011

Further READING:

From Crisis of Capitalism to Revival of Marxism


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