Marx’ Theory or Theories of Crisis
Michael R. Krätke
Lancaster University
The enigma of Marx‘ theory of crisis
 The conventional (‚Marxist‘)view today: There is one (and only one
‚true‘) theory of crisis in Marx – in chapter 15, of volume III of Capital
 The opposite view: There is no theory of crisis in Marx at all
 The traditional view: There are several theories of crisis in Marx‘
Capital, without a clear-cut hierarchy, these might be difficult or even
impossible to reconcile
 The evidence from the MEGA: Marx has worked again and again on a
coherent and comprehensive theory of crisis (based upon intensive
empirical studies)
- for several reasons:
- against Say‘s law, against vulgar political economy, against fellow
socialists
- because of the importance of the relatively new phenomenon of
cycles and crises (the crisis cycle being the specific mode of
motion and development for modern, that is industrial capitalism)
Marx and Sam Moore
 Exchange between Sam Moore and Marx in the early months of
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1873 (letter to Engels, May 31, 1873)
Marx‘ ambition: to arrive at the „main laws“ of the crises by
analyzing all the data available and putting them into the form of
„irregular curves“ (formula‘s)
Sam Moore thought it not feasible at that time
Marx told Engels that he had given up the idea
But he did not give it up entirely!
The famous episode shows: 1. Marx was a seasoned empirical
researcher, 2. adamant about finding and establishing
„general laws“, 3. Marx did not study the calculus just as a
pastime activity.
Böhm-Bawerk and Marx
 Böhm – Bawerk 1898: a theory of crisis is only possible at the end
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of any comprehensive treatise on economic theory (as ist last
chapter or book)
Marx in 1857/58 (in the various versions of the 6 books plan):
the theory of crisis will come at the end, in the last book of his
comprehensive critique of political economy
Book 5 (or 6) : „ World market and crises“
In spite of all the changes of his plan (starting in the Grundrisse)
he never dropped it entirely
In Capital (in all three volumes plus manuscripts) anticipations of
and direct hints to an analysis and explanation of crisis and cyles
abound (which is only to be spelled out at the very end)
Marx’ theories of crisis
 “Anarchy” of the capitalist mode of production
 Underconsumption theory
 Profit squeeze theory
 Disproportionalities
 Overaccumulation (or the TFRP)
 Which one is the real one? (Marx’ preferred theory?) – the basic
concept: General Glut – Overproduction of commodities
(including Overaccumulation of Capital)
 Can those theories be reconciled and /or integrated into one
comprehensive theory?
 Very few attempts so far (Otto Bauer in 1934/35, Simon Clarke
in 1994)
If the evidence from Capital is
inconclusive …
 Let us have a look at Marx‘ real research process
 We cannot possibly know how Marx‘ unfinished, incomplete
theory of crisis would have looked like in its final version
 But we can know and scrutinize what Marx actually did
during the years he kept working on his critique of political
economy
 We have (in the MEGA, partly published, partly still
unpublished) ample evidence for Marx‘ ongoing research
process (from 1843 to 1883)
Marx’ main sources
 Theory: the general glut debate (Say, Ricardo, James Mill,
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Malthus, Torrens, Sismondi)
Empirical, historical research by others: Thomas Tooke (History
of Prices), Gilbart, MacLeod and others
The parliamentary enquiries of the crises since 1847/48 (several
big reports by Select Committees of the House of Commons)
The ‘ Economist’, ‘ Money Market Review’ and others
Bank of England reports plus reports from other major (central )
banks
The ‘crisis literature’ of 1848/49, 1858/59,1866, 1873ff
Marx, the empirical researcher
dealt with 7 successive cycles
1.
2.
3.
4.
5.
6.
7.
1816 -1825
1826 -1836
1837- 1847
1848 –1857
1858 –1866
1867 –1873
1874 - 1882
10y
11y
11y
10y
9y
7y
9y
1825
1836
1847/48
1857/58
1866
1873 – 79
1882
Round one: the 1840s
 1846-47 Studies of Economic History: What is peculiar
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about modern / capitalist crisis?
Statistical notes on the crises of 1825 and 1836
Marx’ thesis: Every modern crisis actually enhances the
level of (industrial) production
1848 – 49 Studying the mechanism of crisis: Why does an
industrial crisis appear as a financial crisis? Why and how
does a crisis originating in Britain shift to France?
General laws and specific mechanisms, general long term
tendencies and particular ‘laws of motion’
Round 2: the 1850s
 3 political – economic reviews of 1850 (dealing with the events of
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1847/48 and later)
24 London notebooks of 1850 – 1853
First small pieces of anaysis: ‘ Bullion’ and ‘ Reflection’ of 1851
Marx’ studies and comments upon crisis tendencies and the next
crisis to come (1850 – 1857) (in various newspaper articles)
Marx’ manuscript ‘ Money, Credit, Crisis’ (1854-55)
All demonstrate how empirical study and theoretical reflection
(rethinking of concepts and theories) are intertwined in Marx’
research
Marx already tries both: Giving historical explanations of the
peculiar events occurring in specific crises and establishing “laws”
regarding their regularities / commonalities
Lessons learned, problems unsolved
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Money matters a lot, the particular form of the monetary system has an impact – Money and
credit (financial) crises could occur separately! But they are also an integral moment of every single
crisis in industrial capitalism!
Trade and commerce matter a lot, hence ‘commercial credit’ matters and ‘bank credit’ even more
(leading to ‘overcredit’ and ‘overspeculation’)!
Hence: in order to deal with crisis we have to deal with the different forms / types of capital and
the whole hierarchy of markets
What is behind ‘aggregate effective demand’ ? The class structure of modern society
Disproportionalities arise from competition between industrial capitals – commercial and financial
capital can acerbate them decisively
Financial markets / monetary transactions are the means to shift the crisis from one part of the
capitalist world to another (an industrial crisis originating in England appears as a financial crisis in
France)
Hence: how to reconcile the explanation of the concrete mechanisms of crisis with the explanation
of the possibility and necessity of a general glut (how are overproduction / overaccumulation in
some industries generalized)?
Crises can be late! Why? (what disturbs the “normal” cycle?)
The “Grundrisse” and the First World
Economic Crisis
Round 3: The world crisis of 1857/58
 ‘Grundrisse’ manuscript, the ‘ Books of crisis’ plus journalism
 Grundrisse: the first systematic discussion of Ricardo and Say and
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their critics – Marx commenting upon the ‘ general glut’ debate
and taking issue with both sides
Marx criticizing the ‘ false explanations’ of crisis cherished by the
socialists /leftists of his time (Proudhon and his disciples)
The first real world economic crisis – the true scale and scope of a
world market crisis (different from the previous ones)
Marx is studying the events in much empirical / statistical detail,
preparing a book (together with Engels) on the crisis of 1857/58
Explaining the course of crisis events in different sectors of the
economy, on different markets, in different parts of the world
market (prices, interest rates, bank reserves and circulation of
money, wages, unemployment, freight rates, bankruptcies)
The lessons of 1857/58
 The changing importance of industrial, commercial and financial crisis
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(from 1836/37 to 1847/48 to 1857/58)
The wide impacts of a general crisis in the industrial centre of the world
market (the centre and the peripheries)
The impact of false economic and financial (banking, money market)
regulations (in Britain and abroad)
How financial market crises turn into a fiscal crisis of the state (public
debt crisis)
The importance of international speculative capital (railway
speculations)
Open questions: why are some crises lasting longer than others, why
are different parts of the capitalist world affected differently
(coexistence, compossibility of crisis and prosperity), how and why do
crises rapidly spread out all over the globe, how and why can a crisis be
overcome? Why is this long expected crisis over in a few months time?
Reinventing the Tableau Économique
Round 4: Marx’ research manuscript of
1861 – 63
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Marx second and most extensive critique of the ‘ general glut’ debate in the Ms of 1861
– 63 (again taking issue with both sides, and with the socialists)
Rethinking crisis research: How to explain the reality and necessity of crises and the
regular form of the industrial cycle in terms of a general theory of modern capitalism?
In order to do this, Marx proceeds with the sketchy analysis of the circulation process of
capital (looking at its different phases in much detail) [unfortunately, some parts of the
manuscript are damaged, so we don’t know all the parts of this investigation]
In order to do this, Marx reinvents the analysis of the total reproduction / accumulation
process – his own “tableau économique” of 1862 (first a graph, like Quesnay’s)
In order to do this, Marx investigates capitalist dynamics: the rise of the organic
composition of capital (cotton crisis) and the turnover of fixed capital, accelerated
accumulation, accelerated turnover, the “value revolutions” (already briefly considered in
the 1857/58 ms) and the “price revolutions”
A new plan: How to integrate building blocs of a theory of crisis into the theory of
capital? Bits and pieces of it are presented from the very beginning until the end, from
the most abstract and simple forms to the most complex and complicated (concrete)
forms of capitalist competition and credit
Marx discussing Ricardo, Say, Mill
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The core of the general glut debate: General crisis (not partial crises in particular industries / markets) are not
only possible, but inevitable (necessary)
Overproduction of commodities (not simple, but the modern kind of commodities) and overaccumulation of
capital (in different forms) are the basic phenomena of every general crisis in capitalism
What is the common foundation /general condition for all modern crises of overproduction / overaccumulation:
the
The meaning of crisis in capitalism: Crises are the moments in the course of capitalist development when all the
‘contradictions’ of capitalism come all together to an eruption – hence, the why and when and how of the
moment of ‘eruption’ has to be explained
Crises are the moments when the basic unity between the disconnected and formally independent, but
intrinsically connected actions in the marketplace and processes of production, reproduction and consumption is
restored – in a ‘violent’, destructive way
Hence: crises in capitalism are moments of intense tensions and conflicts, but also necessary for the very
existence and continued reproduction of modern capitalism - they are the constitutive phase of the cycle (of boom
and bust) as the specific ‘mode of motion’ of modern industrial capitalism
Crises in capitalism are moments of necessary destruction (destruction of use values, depreciation / destruction
of values, depreciation / destruction of capitals, depreciation / destruction of land / nature, depreciation /
destruction of human labour power)
Because of that process of depreciation / devaluation / destruction of values and capital, crises provide
(potentially) a veritable rejuvenation cure for capitalism and/or they serve as turning points in the course of
capitalist development
Marx‘ outline of a plan
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Forms / possibilities of crisis versus actual crises
From the most‚abstract‘ forms of crisis to more ‚concrete‘ forms of crisis
Analysing ever more „new forms of crisis“ with different meanings – advance both in the
analysis of specific ‚forms‘ and of the ‚contents‘ of crisis (some of them, like the form of
a monetary crisis / credit crisis, are both general and specific forms of crisis)
Analysing both the dynamics of capitalist accumulation /extended reproduction and the
dynamics of market extensions
When, how and why do the many „potential crises“ turn (inevitably) into an actual
crisis? Where do we find the „conditions“ of crisis – in the different phases of the
circulation and reproduction process of capital
A new idea / plan for the end (final chapter) of Capital: back to the analysis of „total
circulation“ – only through the analysis of the „Gesamtprozess“ (total process of capital
reproduction)
The „tendency of the rate of profit to fall“ does not matter at all! On the contrary, Marx
is explicitly criticizing the view, as he find it in Adam Smith, that a fall in the general rate
of profit would lead to crises (hence, the often quoted statement: „There are no
permanent crises.“)
Round 5: the crisis of 1866
 This time (again) it is and it looks like a ‘financial crisis’, as it
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assumes a ‘predominantly financial character’
Marx expands his thoughts on monetary and credit crises (already
in the ms of 1861-63) regarding the causes of financial market
crises (overcredit and overspeculation)
Financial crisis as consequence of the financial market reforms
since 1862 (collapse of swindling companies)
Hence: corporate law, financial regulations do matter
Crisis phenomenon: money market crisis, starting with the failure
of a giant London bank
How the financial crisis affects industrial and commercial capital
Behind the crisis: another major shift in the structure of the world
economy (after the end of the US civil war)
Marx’ studies of money markets and
their crises from 1867 onwards
 Another series of financial market studies after the
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publication of Capital, volume I
Again: world money, currencies and financial market crises
(in the centre and in the periphery)
Hence: back to the study of the theory of foreign exchange
(Göschen)
Hence: back to the study of the history and theory of
banking (Gilbart) – the role of the Bank of England as lender
of last resort
Marx starts studying the basics of accountancy (from 1869
onwards) and banking techniques – why?
Round 6: Marx’ study of the first half of
the Long Depression
 Again a series of notebooks (excerpts and few comments,
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collections of statistical material) on financial markets and
banking, on public credit in Britain, USA, Russia, Germany
Marx understands the very peculiar character of the crisis (as the
first phase of the first Great Depression of 1873 -1895)
Hence new problems: Explain the ‘great’ crises and why and how
they are different from ‘normal’ crises in previous cycles!
Again: Major shifts in the capitalist world economy (rise of
industrial agriculture in the USA, the rise of New York )
Alternatives: long term stagnation or another huge world crisis!
Again: the tendency of the general rate of profit to fall does not
matter
Crisis in ‘Capital’ – Evidence and
Interpretation
 Marx uses his notebooks and excerpts from 1846 onwards extensively for the
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first drafts of Capital, volume I, II and III (of 1864-65)
In Capital, Volume I (1867, 1872, 1872-75) Marx comments upon the crises
from 1815 to 1866
Marx uses his later notebooks (from 1868 onwards) in his later manuscripts for
Capital, volume II
Hence: various references to the crises of 1957/58, 1866 and 1873 – 79 in the
8 later ms for Capital, volume II
Marx hesitates to finish Capital, volume II because of the events of the great
crisis of 1873 – 79
In Capital, volume III (ms of 1864/65) no reference to the events of 1866,
1873 -79
Marx’ accumulated material for core sections of Capital, volume III (in
particular section V) goes far beyond the ms of 1864/65
To use this, Marx would have to reorganize the chapter!
The mechanisms of crisis and its laws
 1870s exchanges with Engels, Danielson and Sam Moore (and others)
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about the explanation of the (changing) nature and the (changing)
mechanisms of crisis and cycles
Marx in 1879/80: taking stock of the first phase of the first Great
Depression (a transformation of capitalism / the world market still in
the making / the end of British industrial supremacy / another
industrial revolution in the making?)
Marx realizes that this crisis is quite different, he anticipates the
possibility of a long depression
Consequences for the critique of political economy: How did Marx plan
to change Capital (again)? ( Money, credit and banking, Central banks
and international financial markets, Agricultural crisis, commodity
speculation, resource wars, Sterling replacing gold as world money)
The USA as a new model for advanced capitalism
Taking Marx seriously – the state of the
art in 1882
 A book on ‘ worldmarket and crisis’ was still the culmination of Capital
 Marx was not yet clear about the peculiar character and the
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fundamental causes (the necessity) of crisis in modern capitalism –
except for a
between the
Marx was clear about core mechanisms of many particular crises
(money market crisis, credit crisis, banking crisis, financial crisis,
commercial crisis, industrial crisis)
Marx was not (completely) clear about the mechanism of the
generalization of crisis (as he had not completed his analysis of the basics
of the macroeconomic dynamics of capitalism)
Marx was not clear about (all) the links between crisis and
transformations of capitalism (although he clearly saw a link:
Marx never ever made any reference to the ‘falling general rate of
profit’ as the ultimate or the immediate or intermediate cause of crisis
(how could he?
Could Marx‘ theory of crisis be
(re)constructed?
 Several debates in the era of ‚classical Marxism‘ (Kautsky was the first to open
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the debate already early in the 1890s)
Tugan – Baranowsky and his critics (Kautsky, Bauer, Hilferding, Pannekoek and
others)
Main contributions by the Austro-Marxists (Bauer 1904, Hilferding 1910)
Luxemburg debate (from 1913 to the 1940s) – the beginning of a serious
Marxian macroeconomics (starting with the critique of Luxemburg‘s
Accumulation of Capital and her critique of Marx)
The challenge of the Great Crisis of the 1930s (Moszkowska, Bauer, Braunthal,
Leichter, Sternberg, Preobrashensky, Dobb, Corey, Sartre, Varga, Boudin,
Kuruma, Uno and some others)
Grossmann‘s exceptionalism (his view was not accepted by any of the serious
Marxist economists of the 1920s and 1930s)
Otto Bauers effort to put together what can be combined (unpublished study
of the world economic crisis, written in 1933 – 35)
Can Marx‘ theory of crisis be
reconstructed ?
 Yes, but …
 The real heritage of Marx are the many unsettled questions of his
critique of political economy (I don‘t give the full – and very long – list
here)
 Accordingly: Marx‘ theory of crisis can be put together from the
elements he left us, under one condition …
 … that the many unsettled questions of Marx‘theory of political
economy are dealt with and maybe settled