The following article appeared in the November 1974 issue of Le Monde Diplomatique. The translation is by Intercontinental Press.]
Two general characteristics mark the history of capitalist crises of overproduction. First, these crises have occurred in a regular and periodie way ever since modern capitalist industry conquered the world market. Second, for each crisis the ideologues and apologists for capitalism have tried to present a specific explanation that would make it an exceptional phenomenon unconnected with the nature of capitalism itself.
Logically, the reoccurrence of these crises over the last 150 years would seem to exclude their being explained by unique phenomena, particular to each crisis, although the influence of these specific phenomena should not be denied. Apologies for the capitalist system correspond not to the demands of logic but to those of material interests. This is why the "ideologues" have once again found a specific reason for the decline in economic activity that characterizes the present situation in nearly all the imperialist countries. It is said to be the result of the increase in the price of oil, if not of the political blackmail of the "oil sheikhs."
However, the recession had begun in the United States and in the Federal Republic of Germany (and was around the corner in Japan) before the October war. Moreover, the "deflationary" effect of currency hoarding by the exporting countries (the only actual "withdrawal" of financial resources from the international capitalist economy) is absurd in relation to the volume of world commerce, not to mention the volume of the gross national product of the imperialist countries as a whole.
But if there is a myth that, since the time of the "Keynesian revolution," has refused to die, it is that the capitalist economy (or the capitalist economy rechristened "mixed economy") January 20, 1975
has finally learned how to avoid economic fluctuations, guarantee full employment, and resolve all its internal contradictions. To confess to failure in the matter is not easy, nor is it without social and political consequences. This is why it is easier to make the Arabs the scapegoat.
If it is true that this recession is different from those that have preceded it, it is not because it was made worse by the "oil war" but because it will be the first general economic recession since the second world war: It will hit all the imperialist countries as a whole. For this reason, it will be more serious than any other recession since 1938; one can already predict some fifteen million unemployed in the OECD [Organization for Economic Cooperation and Development] countries during the winter of 1974-75.
Another characteristic of the recession now under way is that it clearly marks the end of the "long boom" following the second world war or, to be more precise, the end of a long period of accelerated growth that dominated the international capitalist economy from 1948 to 1968 (the economy of the United States from 1940 to 1968).
In academic economic theory, conjunctural "long waves" are referred to as "Kondratiev cycles." Kondratiev, a Russian economist of some talent and a former minister under Kerensky, was director of the Moscow Business Research Institute under the Soviet regime until Stalin had him liquidated. In two famous articles he tried to explain the existence of "long waves" in the history of capitalism. Joseph Schumpeter took up this explanation in broad outline and incorporated it into his fundamental work, Business Cycles.
The Marxist (more precisely pseudo-Marxist) tradition has remained rather silent about the theory that there are "long waves" in the history of capitalism. Paradoxically, however, this theory is of Marxist origin. It was elaborated by the Russian
Marxist Parvus, at that time a friend of Trotsky's; by the Dutch Marxist van Gelderen; then by Trotsky himself in his report on the world situation at the third congress of the Communist International.
In essence, what distinguishes the Marxist theory of "long waves" from Kondratiev's theory is that the former is less mechanical. While Kondratiev explained the succession of "long waves of expansion" and "long waves of stagnation" by purely economic factors inherent in the capitalist mechanism, Marxists view external factors (such as wars, revolutions, inventions and discoveries, the outcome of decisive phases of the class struggle, and so forth) as playing an important role.
For Kondratiev, a rigid periodicity governs the succession of "long waves," which, for that reason, he calls "long cycles." For Marxists, there is no such rigidity, given the important role of external, not purely economic factors in the succession of "long waves."
The Marxist theory of "long waves" not only enabled us to predict in the mid-1960s the coming end of the period of rapid postwar expansion and the beginning of a new long period of worsening crisis for the capitalist system (which was ushered in more by May 1968 than by the 1966-67 recession in Germany or the 1967-68 recession in the United States). It has also enabled us to work out a more precise explanation of the succession of twenty- to twenty-five-year periods of accelerated growth and twenty- to twenty-five-year periods of slower growth in the history of capitalism:
- 1847-1873: accelerated growth
- 1873-1893: slower growth
- 1893-1913: accelerated growth
- 1913-1940: slower growth
- 1940(1948)-1968: accelerated growth
- since the end of the 1960s: slower growth
For Marx, it is the period of renew al of fixed capital that serves as the determining factor for the length of the normal economic cycle (a cycle of seven to ten years, which has a tendency to become shortened to a fiveyear cycle in the epoch of "late" capitalism). However, two forms of renewal of fixed capital must be distinguished: that which is limited to reproducing and perfecting machinery within the framework of a given technology; and that which implies a complete and revolutionary renewal of the technology as a whole.
We put forward the thesis that while the normal cycle permits raising the capital necessary for the normal renewal of fixed capital, a long period of slower growth is required for assembling the capital necessary for a full and revolutionary renewal of the entire technology.
Each of the "long waves of expansion" has thus occurred under the aegis of a technological revolution. The "wave" of 1847-73 saw the steamdriven machine replaced by the steam engine. The "wave" of 1893-1913 saw the electric engine and the internalcombustion engine replace the steam engine. And the wave of 1940(1948)- 1968 saw electronics and nuclear energy gradually replace the machinery developed from the classical electricpowered engine.
Each "long wave of expansion" in which new technology is introduced in a massive way (and in which it is necessary, among other things, to construct and finance the installations that will begin to mass produce the new machinery) is followed by a long wave of slower growth," a period limited to perfecting and spreading the new technology.
Each "long wave" undergoes the classic cycles, that is, the successive phases of cyclical ups and downs. But in long waves of expansion" the upswings last longer and growth is more rapid, whereas in long waves of slower growth" the crises last longer and run deeper.
The "long waves" do not, however, follow one another automatically. To account for this fact, an intermediary link must be introduced into the explanation.
To do that it is necessary to examine which factors determine the long-term fluctuations in the rate of profit. In 44
point of fact, for a mass of new discoveries or inventions to produce a technological revolution, it is not sufficient that they merely be registered with the patent office. It is also necessary for capital to have an interest in introducing them into production in a massive way. This presupposes a high rate of profit and an expanding market. The concurrence of these two factors every twenty years is in no way "automatic." External factors are required to get things moving.
Thus in the period following the 1913-39 "long wave of slower growth," a period in which many of the discoveries put into practical application after the second world war were actually made, a radical change in the rate of profit, owing to historic defeats of the international proletariat (fascism) and the second world war, was required to make possible a third technological revolution.
Take the example of the Federal Republic of Germany: In relation to the same work force, the capitalists' profits at the beginning of the 1950s were three times higher than they were in the best years of the Weimar Republic and equivalent to what they were under Hitler in 1938.
But the long period of accelerated growth (1940-68 in the United States, 1948-68 in capitalist Europe and Japan) has precipitated a long-term decline in the rate of profit in two ways. It has brought about a large increase in the organic composition of capital (the relation between expenditures for machinery, buildings, and raw materials on the one hand, and outlays for wages on the other) in industry, agriculture, and transport. This enabled workers to take advantage of a long period of reduced unemployment to halt the steady increase in the rate of exploitation (rate of surplus value) that they were subjected to in the 1930s, 1940s, and 1950s.
Thus the present recession is characterized by the threefold signs of excess productive capacity in an entire series of sectors that "carried" the "long boom" (autos, construction, household electrical appliances, electronics); a reduced rate of profit and a decline in the rate of self-financing (the corporate liquidity crisis); the inability of capitalist governments to impose, immediately or in the short term, a new era of "austerity" on wage workers without first inflicting a serious defeat on the working class. It is the fact that the recession coincides with an exceptionally high level of militancy in the Western working class that makes the present crisis much more serious for capitalism than the crisis of 1929, even though this one is much more moderate on a purely economic level.
Since the second world war, inflation has been "integrated" into the international monetary system by the fixed-exchange system based on the dollar backed by gold and by the permanent inflation of the dollar. It has been the main instrument used by capitalism to "moderate" the effects of its internal contradictions. There have been, as in the past, periodic economic recessions. But they have been less serious and shorter than those of the past, on account of inflation.
The inflation of paper money (of corporate credit) has made it possible to limit the effects of the lowering of the rate of profit on investments. The inflation of consumer credit (and particularly of mortgages and installment purchases) has made it possible to limit the effects of the contradiction between the growth in productive capacity and the much slower growth of the purchasing power of the masses.
In the United States, the total of mortgage debt went from $23 billion in 1946 to $212.9 billion in 1965 to $660 billion at the end of June 1974. Corporate debt rose from $121 billion in 1946 to $567 billion in 1965 to more than $1 trillion at the end of June 1974. As a proportion of the gross national product, private debt taken as a whole has more than doubled since the end of the second world war.
This carrousel could not continue to spin forever. It ended up first sinking the international monetary system, a development that was not difficult to foresee. It then led to increasingly heavy debt service for corporations, which transformed inflation from a motor into a brake on the most costly and the most durable investments. In the end it led to a situation in which increasing doses of inflation were necessary to avoid serious recessions: Inflation was condemned to a perpetual boom. That is how we went from expansion stimulated by inflation to first stagflation and then slumpflation.
It is neither new nor surprising that bottlenecks and situations of specific shortages coincide with a generalized recession (in which U.S. industry works at no more than 80 percent of its capacity). Recession (a crisis of moderate overproduction) is precisely the capitalist mechanism by which massive amounts of capital are withdrawn from sectors suffering from excess productive capacity (such as automobiles) to be poured into sectors in which production has not kept up with the long-term curve of demand (such as energy).
But the question of whether or not these transfers will be carried out at the cost of massive unemployment and the imposition of "austerity" on wage workers is in no way resolved in advance like the givens of an algebraic theorem. It will be the focus of intense class struggles that will mark the months and years to come in all the imperialist countries.