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In Marxian economics, crisis refers to what is called, even currently and outside Marxian theory in many European countries a "conjucture" or especially sharp bust cycle of the regular boom and bust pattern of what Marxists term "chaotic" capitalist development, which will if no countervailing action is taken, mark the transition to a recession or depression. See for example 1994 economic crisis in Mexico, Argentine economic crisis (1999-2002), South American economic crisis of 2002, Economic crisis of Cameroon, Financial crisis of 2007–2009, Great Depression, etc.
A financial crisis may be a banking crisis or currency crisis. It is used as part of Marxist political economy, usually in the specific formulation of the crisis of capitalism. It refers to a period in which the normal reproduction of an economic process over time suffers from a temporary breakdown. This crisis period encourages intensified class conflict or societal change — or the revival of a more normal accumulation process.
In Marxist terms, all such crises are crises of overproduction and immiseration of the workers who, were it not for the distribution of wealth based on the capitalist order, would be the determiners of both demand and production in the first place. So it is predicative of a democratic socialist planned economy that production and consumption are, at least within available technical capability, in sync. Marx in his many works (published and unpublished) suggested several different theories, none of them free from controversy to explain how this worked out in particular circumstances. In his mature work his theory of crisis is framed as a Law of Tendency for the Rate of Profit to Fall combined with a discussion of various counter tendencies, which may slow or modify it’s impact. A key characteristic of these theoretical factors is that none of them are natural or accidental in origin but instead arise from systemic elements of capitalism as a mode of production and basic social order. In Marx's words, "The real barrier of capitalist production is capital itself.
These systemic factors include the classical 3:
- The tendency of the rate of profit to fall. The accumulation of capital involves a general tendency for the degree of capital intensity, i.e., the "organic composition of capital" of production to rise. All else constant, this leads to a fall in the rate of profit, which leads to a slow-down of capitalism and perhaps a crisis.
- Underconsumption. If the capitalists win the class struggle to push wages down and labor effort up, raising the rate of surplus value, then a capitalist economy faces regular problems of inadequate consumer demand and thus inadequate aggregate demand.
- Full employment profit squeeze. Capital accumulation can pull up the demand for labor power, raising wages. If wages rise "too high," it hurts the rate of profit, causing a recession.
as well as pragmatic details of the historical development of capitalism such as the globalisation of production, the willingness of financial capital to create bubbles of fictitious capital not tied to actual production, the failure of capitalism to produce workers with skills in demand or to utilize same efficiently, etc.
However, as stated above, all such factors resolve to the synthetic viewpoint that all such crises are crises of over and/or misappropriated production relative to the ability and/or willingness of the workers who generate the bulk of demand (moreso now than in Marx's time) to consume.
Keynesian Economics which attempts a "middle way" between laissez-faire, unadulterated capitalism and state guidance and partial control of economic activity, such as in the French dirigisme or the policies of the Golden Age of Capitalism attempts to address such crises with the policy of having the state act as a temporary super capitalist and prop of the underlying order more (as in the 2008-9 multi-trillion dollar bailout program of the US Fed) or less (as in the postwar policies of the OECD countries when they averaged 4-5% annual growth) actively supplying the deficiencies of unaltered markets.
It is also a tenet of most orthodox Marxists that such crises are increasingly severe until the contradictions inherent in the mismatch between the mode of production and the development of productive forces reach the final point of failure, determined by the quality of their leadership, the development of the consciousness of the various social classes, and other "subjective factors". Thus the degree of "tuning" necessary for intervention in otherwise "perfect" market mechanisms becomes more and more extreme as the time in which the capitalist order is a progressive factor in the development of productive forces recedes further and further into the past. But the subjective factors are the explanation for why purely objective factors such as the severity of a crisis, the rate of exploitation, etc. do not alone determine the revolutionary upsurge. A common example is the contrast of the oppression of the working classes in France in centuries prior to 1789 which although greater did not lead to social revolution as it did once the complete constellation of forces appeared.
Marxists and Keynesians approach and apply the concept in distinct and opposite ways however. The Keynesian approach attempts to stay strictly within the economic sphere and remove itself from same once the order which it is its intent to preserve no longer requires it. Marxists on the other hand see economic crisis as part of the larger crisis of the social order they wish to supplant.
- "Ch. 15 Vol 3 of Capital". marxists.org
- "Crisis of Capitalism" by MIA Encyclopedia of Marxism