• the application of new technology with the resultant increase in the number of unemployed workers, accompanied by a fall in the rate of the capitalist’s profit

• the overproduction of commodities – items produced for sale to realise a profit

 

Capitalist production as a whole is characterised by anarchy. There is little overall planning for the efficient use of resources. Each capitalist goes about making a profit in any way they see fit. This contrasts with the highly regulated organisation of production in each individual factory or other enterprise. In the capitalist system, the workers in the large factories combine to produce the finished products (socialisation of production), whilst individual capitalists reap the profits (private appropriation of a portion of the value created by labour).

 

As Engels so aptly put it in Socialism: Utopian and Scientific, “The contradiction between socialised production and capitalistic appropriation now presents itself as an antagonism between the organisation of production in the individual work-shop and the anarchy of production in society generally.”

This is associated with the contradictions between the individual and collective interests of capitalists, and between capitalists and workers.

 

Capitalist application of technology leads to unemployment and impoverishment of workers

Each individual capitalist continually strives to perfect technology to try to maintain the advantage over rivals. The introduction of machinery under capitalist conditions means that millions of manual workers are displaced, and then wind up on the scrap heap. A “reserve army” of unemployed workers is created. This army is mobilised in boom times, and thrown on the street when a crunch comes. The existence of the masses of unemployed workers also acts to keep wages to a low level.

 

In forcing the wages of workers to the minimum, the capitalists reduce the purchasing power of the workers who are a major market for the houses, cars, electrical appliances, and other products. This leads to a build-up of products that can often only be sold at a loss. The situation continues until the excessive productive capacity has been destroyed and the market is put in balance again. The most important thing for the capitalist is that capital continues to circulate. Only in this way can value be converted into profit.

 

Value is related to the usefulness and capacity of each product to exchange for another. Surplus value is that portion that is expropriated from the worker. The capitalist appropriates this surplus value as profit when the product is sold.

The rate of surplus value is equal to the surplus value divided by the total of the capital invested in labour (variable capital) and machinery (constant capital).

This means, if the capitalist installs more modern machinery in proportion to the number of workers employed, the amount of constant capital invested in the enterprise is actually increasing relative to the variable capital. However, variable capital (human labour power) is the only source of value so that capitalist faces a fall in the rate of profit, even if the amount of value increases.

 

The capitalist responds to the fall in the rate of surplus value by increasing the volume of production to increase the amount of surplus value. There is also the use of measures such as attacking the wages and working conditions of the workers, installing even more efficient machinery, speed ups, increasing workloads, fewer workers, etc.

 

Engels, writing in Socialism: Utopian and Scientific (1877), summed up the reasons behind economic crises in words that are as true today as when they were written. “As a matter of fact, since 1825, when the first general crisis broke out, the whole industrial and commercial world, production and exchange among all civilised peoples and their more or less barbaric hangers-on, are thrown out of joint about once every ten years. Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsaleable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence; bankruptcy follows on bankruptcy, execution upon execution. The stagnation lasts for years; productive forces and products are wasted and destroyed wholesale, until the accumulated mass of commodities finally filters off, more or less depreciated in value, until production and exchange gradually begin to move again. Little by little the pace quickens. It becomes a trot. The industrial trot breaks into a canter, the canter in turn grows into the headlong gallop of a perfect steeplechase of industry, commercial credit, and speculation which finally, after breakneck leaps, ends where it began--in the ditch of a crisis. And so, over and over again.”

 

Only the overthrow of capitalism and its replacement by socialism will ensure that workers will never again suffer periodic assault on our livelihoods by economic crises.

 

 

We don’t need to go into details of the current crisis here. What is important is that we all strive to cut through the lies, half-truths and distortions that characterise economic reporting and commentary in the bourgeois press. To do this we must all improve our understanding of Marxist economics. We need to study the basic economic writings of Marx, Engels and Lenin.

 

Workers are no strangers to the boom and bust cyclical nature of the capitalist system. We bear the brunt of those booms and the busts. While we make some gains in the boom periods, we suffer from the attacks on wages and conditions and the unemployment that accompany the busts.

 

Workers need to understand how the capitalist system inevitably leads to economic crises, in order to be better able to fight more effectively to defend themselves and strengthen the working class movement.

 

A particularly useful work to study in this regard is Engels’ Socialism: Utopian and Scientific (excerpted from Engels’ Anti-Duhring, itself a valuable introduction to Marxist philosophy and political economy).

 

Close analysis of this book, combined with broader research in Marxist political economy, reveals to us that economic crises are nothing new. In fact, crises are inevitable under the capitalist system. This is due to factors inherent in the capitalist system itself:

• the anarchy of production in capitalist society

• the application of new technology with the resultant increase in the number of unemployed workers, accompanied by a fall in the rate of the capitalist’s profit

• the overproduction of commodities – items produced for sale to realise a profit

 

Capitalist production as a whole is characterised by anarchy. There is little overall planning for the efficient use of resources. Each capitalist goes about making a profit in any way they see fit. This contrasts with the highly regulated organisation of production in each individual factory or other enterprise. In the capitalist system, the workers in the large factories combine to produce the finished products (socialisation of production), whilst individual capitalists reap the profits (private appropriation of a portion of the value created by labour).

 

As Engels so aptly put it in Socialism: Utopian and Scientific, “The contradiction between socialised production and capitalistic appropriation now presents itself as an antagonism between the organisation of production in the individual work-shop and the anarchy of production in society generally.”

This is associated with the contradictions between the individual and collective interests of capitalists, and between capitalists and workers.

 

Capitalist application of technology leads to unemployment and impoverishment of workers

Each individual capitalist continually strives to perfect technology to try to maintain the advantage over rivals. The introduction of machinery under capitalist conditions means that millions of manual workers are displaced, and then wind up on the scrap heap. A “reserve army” of unemployed workers is created. This army is mobilised in boom times, and thrown on the street when a crunch comes. The existence of the masses of unemployed workers also acts to keep wages to a low level.

 

In forcing the wages of workers to the minimum, the capitalists reduce the purchasing power of the workers who are a major market for the houses, cars, electrical appliances, and other products. This leads to a build-up of products that can often only be sold at a loss. The situation continues until the excessive productive capacity has been destroyed and the market is put in balance again. The most important thing for the capitalist is that capital continues to circulate. Only in this way can value be converted into profit.

 

Value is related to the usefulness and capacity of each product to exchange for another. Surplus value is that portion that is expropriated from the worker. The capitalist appropriates this surplus value as profit when the product is sold.

The rate of surplus value is equal to the surplus value divided by the total of the capital invested in labour (variable capital) and machinery (constant capital).

This means, if the capitalist installs more modern machinery in proportion to the number of workers employed, the amount of constant capital invested in the enterprise is actually increasing relative to the variable capital. However, variable capital (human labour power) is the only source of value so that capitalist faces a fall in the rate of profit, even if the amount of value increases.

 

The capitalist responds to the fall in the rate of surplus value by increasing the volume of production to increase the amount of surplus value. There is also the use of measures such as attacking the wages and working conditions of the workers, installing even more efficient machinery, speed ups, increasing workloads, fewer workers, etc.

 

Engels, writing in Socialism: Utopian and Scientific (1877), summed up the reasons behind economic crises in words that are as true today as when they were written. “As a matter of fact, since 1825, when the first general crisis broke out, the whole industrial and commercial world, production and exchange among all civilised peoples and their more or less barbaric hangers-on, are thrown out of joint about once every ten years. Commerce is at a standstill, the markets are glutted, products accumulate, as multitudinous as they are unsaleable, hard cash disappears, credit vanishes, factories are closed, the mass of the workers are in want of the means of subsistence; bankruptcy follows on bankruptcy, execution upon execution. The stagnation lasts for years; productive forces and products are wasted and destroyed wholesale, until the accumulated mass of commodities finally filters off, more or less depreciated in value, until production and exchange gradually begin to move again. Little by little the pace quickens. It becomes a trot. The industrial trot breaks into a canter, the canter in turn grows into the headlong gallop of a perfect steeplechase of industry, commercial credit, and speculation which finally, after breakneck leaps, ends where it began--in the ditch of a crisis. And so, over and over again.”

 

Only the overthrow of capitalism and its replacement by socialism will ensure that workers will never again suffer periodic assault on our livelihoods by economic crises.