The Business Cycle

The Business Cycle

Even if were assumed that workers could effectively resist the capitalists attempts to exploit them more intensively and even if the rate of profits were assumed to remain fairly constant, the adherence of wages to subsistence and the existence of surplus value would generate still another contradiction within the capitalist system. The crissi - or, in modern terms, depression-is an inevitable product of forces inherent in the capitalist economy. Crisis arise, according to Marx and Engels, from the fact that the social organization of production within the factory has developed to the point at which it has become incompatible with the anarchy of production in society which exists alongside it and above it. The capitalist employer is under constant competitive pressure to install new and better machinery and to increase the output of his industrial unit. Because he is the sole decision maker for his unit, he can and does add new machinery, change labor about, and coordinate the entire process within his plant to the end that its products are turned out in greater volume. Since each capitalist employer is subjected to the same pressure, each follows the same policy. While this, when examined from the standpoint of the single plant, appears to be an orderly and logical procedure, from the standpoint of industry as a whole the situation becomes anarchy, for there is no planned coordination of the total output to the total market purchasing power.

Capitalist Overproduction as the Underlying Cause of Crises

Indeed, since the incomes of the masses of workers are limited to their subsistence, and since surplus value, which accounts for the remainder of the values produced, flows off to a limited number of owners who already have relatively high incomes, there is no adequate force at work expanding mass purchasing power as industry expands its output. Only one thing can happen, After a time, capitalist employers find unsalable stocks of commodities on their hands, overproduction has occurred, and industry must slow down to enable these surplus stocks to be liquidated. After an intervening period of liquidation -accompanied, of course, by severe human costs and the creation of a reserve of labor - industry revives and the cycle is repeated.

Marx carefully points out that the underlying cause of crises is overproduction in a capitalist sense and not in the sense of more being produced that can be consumed.

Severity Of Crises Increases

Uncertaintly and Instability thus become quite normal in the modern capitalist society. But more than this, industrial crises are constantly becoming more and more severe. They return periodically and each time more threateningly. The continually developing productive powers of mechanical devices are subjecting the capitalist employers to ever greater pressure to modernize their equipment. The increases in surplus value, while wages cling to subsistence, make the domestic market unable to absorb current output, thus causing the accumulation of surpluses of commodities. The exploitation of foreign markets as outlets for these surpluses has a limit that, when reached, will cause overproduction to be more concentrated on domestic markets, and crises therefore will be more severe. These contradictions inherent in capitalist production, appearing as increasingly severe industrial crises in Marxian theory constitute one of the major causes of the ultimate downfall of the capitalist system.