Marx Revisited: Overproduction & Inevitable Crises

I am teaching Marxist perspectives in International Political Economy class this week in the usual sequence of tackling it together with liberalism and mercantilism/realism. In other words, the three main perspectives in the discipline. Those with just a passing familiarity with Marxist theory probably know Das Kapital's Chapter 32 of "one capitalist always kill many" and "the expropriators are expropriated" fame. While looking around for additional material, I came across a (relatively) expanded and more up-to-date take on the Historical Tendency of Capitalist Accumulation by the late Ernest Mandel that to me makes quite a lot of sense given today's ongoing events.

In particular, the incorporation of China into the world economy (or modern world-systems for those who know of [not my namesake BTW] Immanuel Wallerstein's famous work) is simultaneously a problem of what to do with additional manufacturing capacity on one hand and where to park surplus value (from an export-orientation) on the other. Witness the US subprime crisis borne of "vendor finance" and that in Europe's periphery as it became more uncompetitive with China joining the WTO at roughly the same time the single currency was coming into usage. The irony is rich: integration of an ostensibly socialist state is promoting a crisis of capitalism. Let's begin...

Capitalist economic crises are always crises of overproduction of commodities (exchange values), as opposed to pre- and post-capitalist economic crises, which are essentially crises of underproduction of use-values. Under capitalist crises, expanded reproduction - economic growth - is brutally interrupted, not because too few commodities have been produced but, on the contrary, because a mountain of produced commodities finds no buyers. This unleashes a spiral movement of collapse of firms, firing of workers, contraction of sales (or orders) for raw materials and machinery, new redundancies, new contraction of sales of consumer goods etc. Through this contracted reproduction, prices collapse, production and income is reduced, capital loses value. At the end of the declining spiral, output (and stocks) has been reduced more than purchasing power. Then production can pick up again; and as the crisis has both increased the rate of surplus-value (through a decline of wages and a more ‘rational’ labour organisation) and decreased the value of capital, the average rate of profit increases. This stimulates investment. Employment increases, value production and national income expand, and we enter a new cycle of economic revival, prosperity, overheating and the next crisis.

And, as no one should be surprised, there is no real way to "manage" our way out of an unworkable system according to Marxist thought as we stumble from one crisis to the next:

No amount of capitalists’ (essentially large combines’ and monopolies’) ‘self-regulation’, no amount of government intervention, has been able to suppress this cyclical movement of capitalist production. Nor can they succeed in achieving that result. This cyclical movement is inextricably linked to production for profit and private property (competition), which imply periodic over-shooting (too little or too much investment and output), precisely because each firm’s attempt at maximising profit unavoidably leads to a lower rate of profit for the system as a whole. It is likewise linked to the separation of value production and value realisation.

Accordingly, the solution is largely incompatible with modern economic thought in ridding ourselves of property rights and the divide between capitalist and labourer classes--or doing away with capitalism altogether:

The only way to avoid crises of overproduction is to eliminate all basic sources of disequilibrium in the economy, including the disequilibrium between productive capacity and purchasing power of the ‘final consumers’. This calls for elimination of generalised commodity production, of private property and of class exploitation, i.e. for the elimination of capitalism.

Food for thought, I must say.