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What Causes Capitalist Crises To quote from Karl Marx’s “Wage Labor and Capital“: “One capitalist can drive the other from the field and carry off his capital only by selling more cheaply. In order to sell more cheaply without ruining himself, he must produce more cheaply – i.e., increase the productive forces of labour as much as possible. The productive forces of labour is increased above all by a greater division of labour and by a more general introduction and constant improvement of machinery“. But, “No matter how powerful the means of production which a capitalist may bring into the field, competition will make their adoption general; and from the moment that they have been generally adopted, the sole result of the greater productiveness of his capital will be that he must furnish at the same price, 10, 20, 100 times as much as before”. “…The more productive capital grows, the more it extends the division of labour and the application of machinery; the more the division of labour and the application of machinery extend, the more does competition extend among the workers, the more do their wages shrink together.“ Thus, the capitalist compensates for the decrease in the value of one unit of a given commodity by the quantity - by throwing more and more units of that commodity onto the market. But, while the scope of production and the use of machines grows wider, wages (that is, the amount of goods and services that can be purchased with it) become (compared to the amount of goods and services available on the market) ever lower. Everyone can see this with their own eyes - the store shelves are overflowing (at least during boom times), but only a tiny handful of people can afford the full range of goods on them. Time and again the market becomes clogged with goods, some of which are not marketed. The desire to get rid of the surplus at all costs leads to a catastrophic fall in prices, that is, in the profits of the capitalists. A crisis of relative overproduction begins. It is relative, because overproduction exists only in relation to solvent demand, not to demand in general. A quote from Konstantin Ostrovitianov’s 1954 textbook “Political Economy“: “ Capitalist crises are crises of overproduction. A crisis shows itself first of all in the’ fact that commodities cannot be sold, since they have been produced in quantities greater than can be bought by the main consumers—the mass of the people—whose purchasing power is confined under capitalist relations of production within extremely narrow limits. “Surplus“ goods encumber the warehouses. The capitalists curtail production and dismiss workers. Hundreds and thousands of enterprises are closed down. Unemployment increases sharply. A great number of petty producers are ruined, in both town and country. The lack of outlet for the goods produced leads to disorganisation of trade. Credit connections are broken. The capitalists experience an acute shortage of money for payments. The exchanges crash-the prices of shares, bonds and other securities fall headlong. A wave of bankruptcies of industrial, commercial and banking concerns sweeps forward”. Thus, in times of crisis, capitalists are forced to take measures to keep prices down and to compensate for losses. They slow down and reduce production, physically destroy “surpluses“ and means of production, intensify the exploitation of wage labor, reduce state budget expenditures, invent new taxes and extortions. To quote from Fyodor Michalewski’s 1928 textbook, Political Economy: “Thus pulsates capitalist production on a world scale, periodically narrowing and contracting. Each contraction condemns the means of production and the producers to years of ruin. Class contradictions become more and more acute.“ In times of crisis, it becomes most evident that the productive forces of society have outgrown capitalism, they are unbearably cramped in its private-proprietary framework. The socialization of the means of production and centralized planning are the next, natural stage in the development of mankind.
