The global capitalist crisis that broke out in 2007â2008 in the United States (USA) and spread throughout the world, especially in the developed economies, is not only a crisis of the banks and the financial sector. It is a profound structural crisis of capitalism.
More precisely, it is the crisis of neoliberal capitalism. Capitalism never exists in general and abstract terms, but always in specific and concrete manner, that is, in a historical context. The general and diachronic laws of capitalism always manifest themselves through policies and regulations that are historically volatile and subject to change, which, therefore, allows for the periodisation of the capitalist era. âNeoliberalismâ refers to the latest regulatory framework imposed gradually since the early 1980s. Even if the neoliberal âdogmaâ is based on the assumption that the âmarkets can regulate themselvesâ, the neoliberal regulatory framework exists (âno regulationâ means âa different kind of regulationâ) and is very different from the Keynesian framework, which prevailed in the initial post-war period.
Under the term âcrisisâ, Marxists understand both the âperiodic crisesâ that are a common phenomenon that occurs at relatively regular intervals, and the âstructural crisesâ. Many authors identify the âstructural crisisâ with the âlong-term waves of economic contractionâ (low investment and GDP growth rates), during which recovery and growth periods are weaker and periodic recessions more acute (Mandel, 1995).
Marx himself dealt only with periodic crises, since the discussion on long-term economic waves, which presupposes a relatively long capitalist history, began after Marxâs death. Marx analyses crises in the context of the âindustrial cycleâ (the short-term cycle) of his eraâthat is the cycle that Joseph Schumpeter called the âJuglar Cycleââin contrast to the long-term cycle or the âKondratieff Cycleâ. Marx has in mind a ten-year industrial cycle in which fixed capital investment is in some years much more intensive than in other years, with the result that economic activity fluctuates strongly during the cycle.
Essentially, he uses class struggle to explain the various phases of the cycle. Very briefly, in the period of recovery from the periodic crisis, because of the low level of wages, which has a positive effect on the rate of profit, firms tend to invest in particular in circulating capital and absorb some of the âoverpopulationâ. The reduction of the latter stimulates demand. At the same time, however, it increases the bargaining power of the workers and leads to the replacement of part of the variable part of circulating capital with fixed capital, and the replacement of old fixed capital with new fixed capital. This is the reason why, according to Marx, the duration of the industrial cycle is related to the rotation time of fixed capital: Fixed capital is replaced because of its âmoral depreciationâ, long before it is physically exhausted.
The large fixed capital investment leads to a high economic growth and ultimately to âeconomic overheatingâ, that is to overproduction of commodity values, which undermines growth. The resulting fall in the rate of profit leads to the periodic crisis and the increase of unemployment. The latter undermines wages and increases the profitability of capital. Thus, the industrial cycle begins from the start. In short, class struggle, through its impact on the rate of profit, punctuates the industrial cycle characterised by different stages: crisis, recovery, overheating, and so forth (Marx, 1976).
Our interpretation of the crisis is founded on the theoretical premises provided by Karl Marx. Although Marx did not deal with structural crisis (or long-term waves of contraction) and one does not find in his work a systematic presentation of a theory of crisis, his critique of political economy, that is the very theory of value and capital as expounded in the three volumes of Capital, is a valuable tool in understanding both periodic and structural crises, including the current global crisis.
More specifically, we will show that the first four chapters of the second volume of Capital (Marx, 1992) analysing âindustrial capitalâ, the chapters of the same volume analysing the âreproduction schemas of capitalâ, as well as the analysis of the relationship between âindustrial capitalâ and âmoney capitalâ, developed in some chapters of the third volume, are indispensable for understanding the current crisis.
In the Marxist debate on the crisis, reference to the downward trend in the rate of profit and the argument over whether or not there has been a decrease or an increase in the rate of profit since 1980 obscures a consideration that has not received due attention: The rate of profit diverges from the rate of capital accumulation. That is to say, the same rate of accumulation of fixed capital requires a higher rate of profit, or for the same rate of profit the rate of accumulation is lower (Husson, 2008, 2010).
This divergence, which is confirmed by the upward trend in the ratio of Surplus Value/Net Investment in fixed capital or the ratio Surplus Value/Accumulation, is, we argue, key to understanding the reproduction schema of capital in the neoliberal era, the role of money capital within it and, ultimately, the crisis as such.
Though we believe (like many other Marxist scholars) that the rate of profit has been increasing during the neoliberal period, the shift of attention from the rate of profit to the above-mentioned divergence permits to avoid a very technical and complex discussion about the calculation of the value of fixed capital stock, which is the key issue in the controversial discussion about the evolution of the rate of profit since the early 1980s. By following the tracks of surplus value, it is possible to present the neoliberal schema of reproduction and its immanent inconsistencies that led to the crisis.
This shift of attention from the rate of profit (analysed in the third volume of Capital) to the upward trend in the ratio Surplus Value/Net Investment in fixed capital requires particular attention to the second volume of Capital, which seems to be forgotten in many Marxist interpretations of the present crisis.
Particular attention is also placed on money capital, not as one of the three industrial capital circuits developed in the second volume, but as a seemingly autonomous entity (which Marx develops in the third volume of Capital) and the way it is conjoined with productive capital (Marx, 1991) during the neoliberal era. Money capital is an essential part of the neoliberal reproduction schema and not just a parasitic organism that undermines the so-called real economy. The role of money capital has been decisive both in the recovery of the rate of exploitation since 1980 and in respect to the rhythm of value realisation.
This book contains six chapters, including the first and the last chapters, âIntroductionâ and âConclusionâ, respectively. In the second chapter, âProfitability, Accumulation and Industrial Capitalâ, official statistical data are provided, indicating that labour productivity has been increasing at a faster pace than real wages, which is tantamount to a growth in labour exploitation. As a result of the increase in labour exploitation, the rate of profit recovers. However, the rate of accumulation of fixed capital does not track the recovery in the rate of profit. Investment in fixed capital proves to be less sensitive to the increase in profitability than in the past, thus creating a gap between the curve of the profit rate and the curve of the accumulation rate. GDP growth, following the rate of accumulation, lags behind the rate of growth in the âgoldenâ post-war period.
Because the official methodology to estimate the value of fixed capital stock is controversial and can have a strong impact on the calculation of the rate of profit according to some authors, we present the ratio of Surplus Value (for surplus value we use a comparable concept available in official statistics: the net operating surplus, total economy) to accumulation (net investment in fixed capital). This reveals a strong upward trend. This ratio confirms the divergence between the rate of profit and the rate of accumulation.
Through the presentation of statistical data, an initial theoretical issue arises. Is it possible for the rate of profit to have been recovering since 1980 and yet still the capitalist economy to have entered one of the most profound crises in capitalist history? Who has stipulated that all major crises of necessity arise from a fall in the rate of profit? Certainly not Marx, whose theory of crises is not mono-causal. The fall in the profit rate may equally be the result and not the cause of the crisis.
The very concept of capital refers to an articulation of economic rhythms, more specifically of three fundamental rhythms. In the first four chapters of the second volume of Capital, Marx presents the three circuits of industrial capital: the circuit of mon...