Wolfe 1986

Review: Capitalist Crisis and Marxist Theory
Author(s): David A. Wolfe

Review by: David A. Wolfe
Source: Labour / Le Travail, Vol. 17 (Spring, 1986), pp. 225-254
Published by: Canadian Committee on Labour History and Athabasca University Press
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REVIEW ESSAYS / NOTES CRITIQUES
Capitalist Crisis and Marxist Theory
David A. Wolfe
Samir Amin, et al., Dynamics of Global Crisis (New York and London:
Monthly Review Press 1982).
Andre Gunder Frank, Crisis in the World Economy (New York and London:
Holmes and Meier 1980).
Makoto Itoh, Value and Crisis (New York and London: Monthly Review Press
1980).
Ernest Mandel, Late Capitalism, trans, by Joris de Bres (London: New Left
Books 1975).
Ernest Mandel, The Second Slump: A Marxist Analysis of Recession in the
Seventies, trans, by Jon Rothschild (London: New Left Books 1978).
Ernest Mandel, Long Waves of Capitalist Development: The Marxist Interpre
tation (Cambridge: Cambridge University Press, and Paris: Editions de la
Maison des Sciences de l'Homme 1980).
Paul Mattick, Economics, Politics and the Age of Inflation (White Plains, NY:
M.E. Sharpe 1978).
Paul Mattick, Economic Crisis and Crisis Theory (White Plains, NY: M.E.
Sharpe 1981).
Joseph A. Schumpeter, Can Capitalism Survive? with an introduction by
Robert Lekachman (New York: Harper Colophon 1976).
Joseph Steindl, Maturity and Stagnation in American Capitalism, with a new
introduction by the author (New York and London: Monthly Review Press
1976).
David Wolfe, "Crisis and Marxist Theory," Labour/Le Travail, 17 (Spring 1986),
225-254.
225
226 LABOUR/LE TRAVAIL
I
Introduction . . . . I am . . . convinced that the alternative rise
and fall of wages, and the continual conflicts
THE CONCEPT OF CRISIS is central to between masters and men therefrom,
arising
Karl Marx's theory of capitalist develop are, in the present organization of industry, the
ment.1 However, the meaning of crisis indispensable means of holding up the spirit of
has been clouded the the labouring classes, of combining them into
considerably by
one great association against the encroach
somewhat different contexts in which it is
ments of the ruling class and preventing them
used. Crises are
by Marx seenas regulat
from becoming apathetic, thoughtless, more or
ory mechanisms by which the internal bar
less well-fed instruments of production. ... In
riers to the continued self-expansion of
order to rightly appreciate the value of strikes
capital are overcome and the process of and combinations, we must not allow ourselves
accumulation is able to continue. to be blinded of
capital by the apparent insignificance
In this sense, crises are largely short-run their economic results, but hold, above all
which the things, in view their moral and political conse
cyclical phenomena regulate
periodic fluctuations of capitalist econ quences. Without the great alternative phases
omies. Crises are also in relation of dullness, prosperity, overexcitement, crisis
analyzed
and distress, which modern industry traverses
to the long-run tendency for the rate of
in periodically recurring cycles, with the up
profit to fall. However, the exact relation
and down of wages resulting from them, as
between this longer-run tendency and the
with the constant warfare between masters and
more cyclical occurrence of crises has men closely corresponding with those vari
been the source of considerable debate. ations in wages and profits, the working
Further confusion originates with Marx's classes of Great Britain, and of all Europe,
suggestion that the periodic occurrence of would be a heart-broken, a weakminded, a

crises could be associated with the devel worn-out unresisting mass, whose self
of the political conditions neces emancipation would prove as impossible as
opment
to that of the slaves of ancient Greece and Rome.2
sary for the transition from capitalism
socialism. The link between the objective reality
This last aspect of crisis theory goes and subjective perception of crisis in
directly to the heart of Marx's political Marx's theory has its roots in the classical
project. Embedded in his analysis is the meaning of theconcept.3 In classical

notion that crises contribute to the evolu Greek and drama, a crisis
historiography
tion of
the working class' appreciation of was used to denote a turning point or
the chaotic nature of capitalist production. moment of decision in the life of an indi
In their efforts to protect their economic vidual or society, when the capacity of the
well-being against the severe disruption of individual or society to itself

reproduce
periodic crises, workers acquire the politi was in jeopardy. The classical con
placed
cal understanding and practical experi of crisis includes both an objective
cept
ence necessary for the eventual overthrow and a subjective dimension. The objective
of the capitalist system:
2
Karl Marx, "Russian Policy Against Turkey
1 am ? New in
I indebted to the following Chartism," York Daily Tribune,
greatly people
who have taken the time to read the first draft Karl Marx and Frederick Engels, Collected
of this review and offer me their insights and Works, Vol. 12: 1853-54 (New York 1979),
criticisms: Rob Albritton, Jon Cohen, Gordon 169, quoted in Leszek Kolakowski, Main Cur
Duncan Daniel Drache, rents of Marxism, Vol. 1: The Founders, trans.
Cleveland, Cameron,
Richard A. Gunder Frank, Peter Hall, P.S. Falla (Oxford and New York 1978),
Day,
John Keane, Michael 302-3.
Lebowitz, Bryan Palmer, 3
and Susan Pokorny. While I have not always The following discussion is drawn from my
the advice I have bene treatment of this question in "The Crisis in
accepted they offered,
fited greatly from the re-evaluation that their Advanced Capitalism: An Introduction,"
Final responsibility for all Studies in Political Economy, 11 (1983),
reading provoked.
errors must, as always, rest with the author. 8-9.
CRISIS AND MARXIST THEORY 227
dimension involves the way in which the the apparent lack of ambiguity
Despite
crisis appears as an externally determined in Marx's formulation, the ten
original
phenomenon, following a course indepen sion between the objective and subjective
dent of the actions of the individuals moments of crisis lies at the heart of most
whose lives it affects. The
subjective debates within Marxism.
subsequent
dimension involves the way in which indi From the time of the Second Interna
viduals apprehend and respond to the tional, the of the role of eco
question
challenge posed by the crisis. Crises thus nomic crisis in the renewal or transforma
represent fateful moments when previous tion of capitalism has remained problema
patterns of social relationships are called tic. The of the debate has
intensity
into question. As such they create the increased with the of world
recovery
opportunity for individuals to perceive the from each successive crisis of
capitalism
possibility of alternative forms of organi the past one hundred In principle,
years.
zation. The subjective choices made by crisis involves an element of choice
every
individuals in response to the crisis can between the reconstitution of the relations
constitute a critical element in the resolu of in a manner which makes
production
tion of the crisis. the renewed of
possible self-expansion
The significance of crisis for Marx's or their transcendence the
capital, through
theory of capitalist development thus transformation of the capitalist
qualitative
encompasses tworadically different pos mode of The fact that each
production.
sibilities, that of renewal and that of trans successive crisis has been resolved in the
formation. In purely economic terms, former rather than the latter fashion
Marx envisages crises as part of the creates a profound dilemma for Marxism.
cyclical process of renewal by which bar Marxists have tended to respond in one of
riers to accumulation are overcome. But at two a ritual incantation that
ways:
the same time, he clearly sees crises as an the reoccurrence of crisis will
ultimately
important psychological agent (although lead to the development of a subjective
by no means the only one) in the evolution
political consciousness on the part of the
of working-class consciousness, increas or the that
proletariat, acknowledgement
ing the possibility of the ultimate trans the relation between objective conditions
cendence of capitalism. Much of the his and consciousness is consider
subjective
torical debate within Marxism over crisis more than Marx
ably problematic origi
has centred around the possibility
theory nally envisioned.
of purely economic breakdown of What has notably been in most
lacking
capitalism. However, as Michael Marxist of crisis is the
analyses capitalist
Lebowitz has correctly argued, not only that crisis transforms
insight capitalist
does this misinterpret the objective relations of production, but in ways radi
aspects of Marx's crisis theory, it funda different than those
cally anticipated by
mentally contradicts his view of praxis, Marx. The real challenge for a contempo
the uniting of philosophy and the pro
rary Marxist theory of crisis is to incor
letariat. "What inMarx's view made the manner of resolution of
capi porate past
tal finite is that people become increas crises as an essential element of the
conscious that these barriers to capi Such a reformulation of Marxian
ingly theory.
tal as a form for the absolute development crisis an of the
theory requires analysis
of human productive powers are inherent in which crises have served to
way past
in capital,. . .Thus, it is conscious human transform capitalist relations of produc
beings who recognize that
capital is its
own barrier, who are the limit to capital."4
of Profit: A Dialectical View," Canadian Jour

4
Michael A. Lebowitz, "Marx's Falling Rate nal of Economics, 9 (1976), 250.
228 LABOUR/LETRAVAIL
tion and the potential implications of the has added a fourth variant: the
recently
current crisis. The goal of a critical review profit squeeze generated by the conditions
of current Marxist of capitalist the and contraction
theorizing governing expansion
crises is to transcend some of the sterility of the reserve army of labour.6
which has characterized past debates by A recent of Marxian crisis
study
analyzing the concrete role played by theory by Makoto Itoh suggests there are
crisis in capitalist development. four major variants as well, but classifies
them slightly differently. He argues that
II there have been two major
historically
Varieties of Marxian Crisis variants, excess and
Theory commodity theory
excess Each of these in
CONSIDERABLE ENERGY has been capital theory.
turn can be subdivided into two catego
expended within Marxism on the extensive
ries: excess commodity theory includes
debate over the varieties of crisis theory
the disproportionality and undercon
derived from the different elements of
sumptionist variants discussed by Sweezy
Marx's work. A careful examination of
and Shaikh, while excess
capital theory
these debates
suggests that the disputes
includes the tendency of the rate of profit
between the various interpretations have
to fall and the overproduction of capital in
been greatly exaggerated and it is possible
relation to the available working popula
to them into a synthetic inter
incorporate
tion ? under which the profit squeeze
pretation of crisis. This reconciliation,
variant can be subsumed.7 (94-5; 120-30)
however, does not resolve the primary
Following Itoh's classification, each of
problem, the significance of crises for the
?
the four major variants of crisis theory
development of capitalism and their
on the evolution of the working disproportionality, underconsumption,
impact
the tendency of rate of profit
the to fall
class. This preoccupation with the debate
?
and the overproduction of capital is
between the varieties of crisis theory has
analyzed in the following discussion.
contributed to the failure of Marxism to
develop an adequate of the

appreciation
role which crises have
The Disproportionality Thesis
past played in
THE FIRST OF THE FOUR variants of
capitalist development; the interment of
crisis theory, the disproportionality
the debate may clear the way for such a
project.
The lack of consensus among Marxists Economy (New York and London 1970),
on the nature of crisis is reflected chaps. 9-10.
theory tt to the His
Anwar Shaikh, "An Introduction
in the various typologies of crisis theory.
tory of Crisis Theories," in Economics Educa
In his study of Marx's economic theory, tion Project of the Union of Radical Political
Paul Sweezy identified three variants of
Economics, U.S. Capitalism in Crisis (New
crisis (1) crises associated with
theory: York 1978), 219-40.
the tendency of the rate of profit to fall; 7 have recently been
Alternative classifications
(2) crises in the lack of pro by James O'Connor, "The Meaning
originating suggested
portionality between I and II of Crisis," International Journal of Urban and
Departments
of Marx's and Regional Research, 5 (1981), 301-28; Thomas
reproduction schemes;
E. Weisskopf, "Marxist Perspectives on
(3) crises arising from the chronic ten
Cyclical Crises," in Economics Education Pro
dency of capital to restrict the consuming
ject, U.S. Capitalism, 241-60; and "Marxian
power of workers, thereby limiting the
Crisis Theory and the Rate of Profit in the Post
realization of surplus value in the sphere
war U.S. Economy," Cambridge Journal of
of circulation.5 To this list, Anwar Shaikh 3 (1979), and Erik Olin
Economics, 341-78;
"Historical Transformations of
5 Wright,
Paul Sweezy, The Theory of Capitalist Capitalist Crisis Tendencies," in Class, Crisis
Development: Principles of Marxian Political and the State (London 1978), 111-80.
thesis, historically figured most promi debates over crisis theory adopt this posi
nently in the debates of the Second Inter tion.9
national. Two of the major theorists of
this period ? M. Tugan-Baranovsky and The Underconsumptionist Thesis
? THE SECOND VARIANT of crisis theory
Rudolf Hilferding took the reproduc
tion schemes of Volume II of Capital as has continued to enjoy a broader base of
the starting theory of crisis. Marxist theorists. The
point for their support among
Ernest Mandel argues that they fundamen underconsumptionist variant was first
the function of the reproduc articulated by Rosa in her
tally mistook Luxemburg
tion schemes in Marx's namely critique of the disproportionality thesis.
theory,
"to that it is possible the She argued that the real source of
prove for
capitalist mode of production to exist at capitalist crisis lay in the lack of sufficient
all." (1975, 25) However, Mandel's cat money to realize surplus value. The
dismissal of the thesis overlooks surplus value which is not consumed by
egorical
the fact that disproportionality appears as capitalists, but which is added to the mass
a necessary crises. The in order to increase
aspect of capitalist capital production,
point of the production schemas is to dem lacks an outlet in the form of buyers of its
onstrate that the process of adjusting products. Since capitalism is incapable of
demand between the two departments is solving this contradiction within the con
an one and
the that fines of its closed system, the only solu
extremely complex
market is incapable of providing the infor tion is to seek new outlets in the form of
mation to maintain intersectoral external markets. Capitalist crises due to a
required
equilibrium. is as inte chronic tendency towards underconsump
Disproportionality
tion thus constitute the primary source of
gral to the process of capitalist production
as are crises themselves. imperialist expansion. Luxemburg's
thesis was the object of criticism from
To say that there is no general over-production,
many sources, principally Lenin and
but rather a disproportion within the various
Bukharin. The latter argued that her error
branches of production, is no more than to say
was to confuse Marx's of simple
that under capitalist production the proportion analysis
with that of expanded
ality of the individual branches of production reproduction repro
duction. In expanded
springs as a continual process from dispropor reproduction, part
tionality, because the cohesion of the aggregate of the capital expended takes the form of
production imposes itself as a blind law upon variable that is, workers'
capital, wages,
the agents of production, and not as a law, which the purchasing to
provides power
which being understood and hence controlled consume the increased output. Bukharin
by their common mind, brings the productive situated the source of
under their joint control.8 underconsumption
process
9 of the limitations
More extended discussions
Thus, capitalist crises are necessarily dis
of the disproportionality variant of crisis theory
proportionality crises, but this is not the can be found in Itoh, 120-1, 136-7, Mattick
equivalent of saying that crises originate (1981, 81-8), Sweezy, chap. 10, Shaikh, 228,
in the disproportions between the two and Russell Jacoby, "The Politics of the Crisis
departments. The disproportionality vari Theory: Toward the Critique of Automatic
ant of crisis theory occupies a position of Marxism II," Telos, no. 23 (1975), 10-7. For
historical as few con a contemporary perspective which subscribes
largely significance,
contributors to the Marxist to the disproportionality variant, cf. Richard B.
temporary
Day, introduction to The Decline of
by E.A. Preobrazhensky, ed.
8 Capitalism,
Capital: A Critique of Political Richard B. Day (New York 1985). Day has
Economy,
Vol. Ill: The Process Production pointed out that the disproportionality thesis
of Capitalist
as a Whole, Frederick ed. (London in the writings of Lenin,
Engels, figured prominently
1972), 257. Trotsky, and Preobrazhensky as well.
in the constant tendency of capital to in oligopolistic industries, due to the dif

strive for the creation of higher levels of ferential cost advantage this affords the
surplus value while limiting the purchas firms with the new techniques. The higher
ing power of workers. He "thus purified profit rates lead to a higher internal rate of
the Marxist underconsumptionist theory accumulation in those industries and,
by locating the fundamental contradiction ultimately, to a higher degree of concen
in the inner production relation between tration. Steindl concluded from this that
capital and wage labour, rather than in the *'.... The rate of internal accumulation
external relation between capitalist pro and consequently the net profit margin at
duction and external markets. . . ,"10 levels of capacity utilization will
given
(Itoh, 123) tend to a (maximum) level determined by
The variant was the rate of growth of the industry, the rate
underconsumption
further in Paul The of capital intensification and the rate at
developed Sweezy's
which existing production capacity is
Theory of Capitalist Development. Quot
the work of Lenin and Bukharin being eliminated." (51) His empirical
ing
and drawing on the analysis investigation of the trend of profit shares
approvingly,
of imperfect competition in the in major industry groups in the United
developed
1930s, as well as the work of Keynes, States from 1899 to 1939 confirmed this
the effects of hypothesis. In those industries with high
Sweezy incorporated
and the role of the state levels of concentration or substantial bar
monopoly capital
into his The of the rela riers to entry, the share of profits demon
analysis. analysis
between the growing strated a tendency to in
tionship pervasive long-run
ness of and the crease. (80-1)
oligopolistic competition
tendency towards underconsumption was
Proceeding from this microeconomic
developed further in Joseph Steindl's
analysis to the macroeconomic level, he
Maturity and Stagnation in American
argued that the oligopolistic sector of the
Capitalism, first published in 1952.
economy will exhibit a tendency for profit
Steindl started from the assumption
margins, at given levels of capacity utili
that producers deliberately hold excess
zation, to rise. The constant shift in the
capacity for a variety of reasons. They are
share of national income from wages to
eager to be in on an economic at
upswing will create pressure on the level of
profits
the start of a period of expansion, and not
effective demand and will lead to a reduc
wait until they can install the required pro tion in the level of national income and
ductive capacity. Furthermore, producers
output. Individual firms will try to adjust
tend to opt for levels that leave
capacity to this development by reducing their
room for a further expansion of their sales
levels of capacity utilization. This strat
effort at a later date. Thus, the deliberate
egy may benefit individual producers, but
holding of excess is the norm,
capacity for the economy as a whole, it generates
rather than the exception, in modern
higher levels of excess capacity and a
industry. Oligopolistic industries also
greater deficiency of effective demand.
exhibit the characteristics of downward
"The changes introduced into the eco
rigidity of prices and higher barriers to nomic system by the spread of oligopoly
entry. Producers try to keep prices just thus make it liable to react... to a pri
low enough to exclude new entrants from
mary decline of capital accumulation by a
the industry. The process of technological further retardation of growth." (123)
innovation tends to raise the rate of profit
The fall in the level of capacity utiliza
10 and tion and reduction in the level of effective
Other discussions of Luxemburg's
can be demand greater pressure on the
Bukharin's theory of underconsumption places
found in Sweezy, 178-86, 202-7, Mattick profit margins of firms in the competitive
(1981, 88-95), and Jacoby, 22-9. sector than those in the oligopolistic sec
tor. This forces a larger number of small War II period, it exerted a strong influ
competitive producers out of business, ence on Marxist theorists the

throughout
increases the overall degree of oligopoly post-war period. Baran and Sweezy
in the economy and accelerates the trend explicitly cite Steindl's pathbreaking
towards stagnation. Empirical investiga work as one of the formative influences in
tion of these macroeconomic hypotheses their own a decade
thinking.11 Writing
confirmed his prediction of growing stag and a half later, and with the experience
nation, reflected in a fall in the rate of of the post-war boom fixed prominently in
growth of capital and savings, leading to a their minds, they were concerned to
fall in the rate of profit. In an attempt to explain the absence of the stagnation that
identify the primary cause of this fall in Steindl had anticipated. This they did in
capital accumulation, he isolated the fac terms of the various mechanisms put in
tor of maturity ?
the spread of a domin place to absorb the economic surplus: the
ant pattern of oligopoly in the American wasteful sales efforts of corpora
large
economy, dating from the last decade of tions and the useless government military
the nineteenth century. (191) expenditures financed primarily through
In the concluding chapter of the study borrowing. Indirectly through Baran and
Steindl addressed the question of the rela Sweezy, Steindl's analysis has influenced
tion between his theory and Marx's theory a number of other theorists.12
prominent
of capitalist accumulation. Drawing on Given the influence which
lasting
Sweezy, he divided Marx's arguments Steindl's work has
exerted, it is important
about the long-run tendency of capital to identify the shortcomings in his argu
accumulation and the theory of crisis ment. First, and most is his
important,
between the law of the falling rate of tendency to conflate the cyclical and secu
profit and the underconsumption lar aspects of underconsumption. In his

approach. After critically dismissing the hands, the thesis
underconsumptionist
falling rate of profit variant, Steindl became a purely secular trend towards
that the spread of thus
suggested oligopoly long-run stagnation, losing sight of
results in an increase in the rate of surplus the potential role of crises in overcoming
value produced, but the realization of this the barriers to capital accumulation. The
increased surplus value depends on the most obvious flaw in the stagnationist
existence of an adequate market. This can thesis has been identified by Steindl him
only occur if there is a self in the introduction to the revised edi
corresponding
increase in investment and capitalists' tion of his book? the role played by the
consumption. If this fails to occur, the
increased surplus value merely results in
11
the creation of excess In an Paul A. Baran and Paul Sweezy, Monopoly
capacity.
excess Capital: An Essay on the American Economic
oligopolistic economy, capacity
and Social Order (New York and London
can persist and exert a depressing influ
ence on 1966), 56.
investment decisions, thus retard 12
These include most
notably James O'Con
ing the rate of growth of capital. Steindl
nor's The Fiscal Crisis
of the State (New York
concluded that his own theory could be in fairness,
1973), esp. chaps. 1-2, although
viewed as an extension and elaboration of O'Connor is not without his own criticisms of
Marx's underconsumption theory. (245) Baran and Sweezy; cf. his "Baran and
Sweezy's Monopoly Capital," in The Corpo
The appeal of Steindl's work derives
rations and the State: Essays in the Theory of
both from the analytical rigour of his Capitalism and Imperialism (New York 1974),
theoretical model and the meticulous mar 43-54. The influence of Baran and Sweezy's
shalling of data to confirm its hypotheses. economic can also be found in Jurgen
analysis
Although his theory was applied to an Habermas' Crisis, trans. Thomas
Legitimation
interpretation of data from the pre-World McCarthy (Boston 1975), esp. Part II.
state in sustaining post-war expansion. Keynesian welfare state in sustaining the

However, in contrast to Baran and post-war phase of expansion in the
Sweezy, he does not view unproductive advanced capitalist economies.15
military expenditures financed through

borrowing as the primary contribution of The Falling Rate of Profit Thesis
the state. an argument THE THIRD VARIANT of Marxian crisis
Following
advanced by M. Kalecki,13 Steindl argues theory links the
cyclical occurrence of
that it was the increase in direct govern crises to the tendency for the rate of profit
ment taxation of corporate profits and the to fall. This variant of crisis theory was
recycling of this money into consumption originally articulated by Erich Preiser in
through welfare expenditures that pro the early twentieth century and was given
vided the level of effective demand neces its classical formulation by Henryk
sary to offset the stagnationist tendency he Grossman in 1929. Prior to Grossman's
had forecast. He further admitted that he work, the theory of the tendency for the
had seriously underestimated the expan rate of profit to fall had not been included
sionary impact of the introduction of new in any Marxist treatments of the subject as
technological innovations derived from the primary factor in the theory of crisis.
wartime and post-war military research. Drawing on Marx's discussion of the law
The ready supply of war-generated inno in chapters 13 to 15 of Volume III of Cap
vations provided a powerful stimulus to ital, Grossman was the first to elevate this
expanded investment in the post-war aspect of Marx's theory to the core of the
economy, (ix-xii) theory of crisis.

Another flaw in Steindl's argument, In chapter 13, Marx discusses the rate
however, is his failure to allow for the of profit in value terms, as
(r), expressed
of mechanisms which could
possibility the total of surplus value (s) over the value
the of workers in the of variable
adjust wages capital (v) and constant capital
sector to the increases in pro can be reexpressed
oligopoly (c). This relationship
ductivity in that sector, more than off in algebraic terms as
the tendency forthe profit share to
setting =r
rise. His exclusion of the role s/v
complete
played by trade unions, as well as the sys c/v + 1
tem for regulating labour relations results where s/v is the rate of and
exploitation
in a one-sided analysis of the relations of c/v is the value of the organic composition
production.14 Consequently, Steindl's of Marx that increased
capital. argued
analysis precludes the possibility of the
capitalist competition constantly compels
post-war form of intensive accumulation to substitute mechanical power
capitalists
which involved the tying of mass consump for human labour in order to increase pro
tion levels to rising productivity through ductivity. This increases the ratio of con
the collective bargaining process. This stant to variable (c/v) and results
capital
pattern of productivity wage bargaining in a rising of capital.
organic composition
was closely tied in turn to the role of the this can be offset increases in
Although by
13 in the United 15
"TheEconomic Situation Michel Aglietta, A Theory
of Capitalist Reg
States as Compared with the Pre-War Period," ulation: The U.S.
Experience, trans. David
in The Last Phase in the Transformation of Fernbach (London 1979), 116-22, 190-208; a
Capitalism (New York and London 1972), more empirical analysis of the trend of produc
88-93. tivity wage bargaining is found in John Eat
14 A. "Post Keynesian Economic and Roger
J. Kregel, well, John Llewellyn, Tarling,
Theory and the Theory of Capialist Crises," "Money Wage Inflation in Industrial Coun
Bulletin of the Conference of Socialist Econ tries," The Review 41
of Economic Studies,
omists, 4(1972), 71-2. (1974), 515-23.
the rate of exploitation (s/v), Marx can be averted only so long as the increase
suggested that this was unlikely to be suf in the rate of
exploitation is sufficient to
ficient to match the rise in the organic offset the rise in the organic composition
composition of capital and in the long run, of capital. "Inevitably a point will be
the rate of profit would tend to fall. reached at which the greatest quantity of
Grossman argued that this tendency of the surplus value that can possibly be extorted
rate of profit to fall would lead to the from the diminished working class is no
ultimate collapse of capitalism, but he sufficient to augment the value of
longer
emphasized that the inevitability of the accumulated capital." Mattick
capitalist collapse in no way implied its emphasizes that this line of reasoning rep
automatic collapse. The value of an objec resents an abstraction from the empirical
tive analysis of the conditions under reality of
the capitalist economy, "... the
which would collapse was to tendency of the rate of profit to fall... is
capitalism
highlight the weak links in the system that not a process observable directly in reality
could serve as a guide to the political but a drive to accumulate manifested in
actions of the
revolutionary proletariat. market phenomena...." (1981, 54-5)
Thus, in Grossman's hands the theory of This analysis of capitalist relations of pro
crisis was transformed from a predomi duction suggests the historical limits of
nantly cyclical phenomenon into a secular capitalism as a mode of production but
tendency.16 does not determine the exact moment of

Grossman's of Marxian its collapse.
interpretation
crisis theory has exerted a strong influ to
The tendencyfor the rate of profit
ence over the contemporary generation of tenden
fall is offset the counteracting
by
Marxist theorists, primarily through the in chapter 14
cies specified by Marx
work of Paul Mattick. Mattick maintains
(which are real phenomena). As long as
that Marx's analysis of capitalist relations
they are successful, the tendency for the
of production in value terms is an abstract to fall is not observed.
rate of profit Only
schema designed to grasp the fundamental are
when the counteracting tendencies
relations of production in capitalism. to prevent
insufficient this is the fall in the
They are not intended to directly explain out
rate of
profit reflected in the actual
market phenomena. (1981, 50) The key to break of crises. Thus, in Mattick's
capitalist development is the creation of the outbreak of cyclical
analysis, crises
sufficient surplus value to sustain the fur are actual of
observable manifestations
ther expansion of capital. (1981, 54) Mat the more long-run underlying tendency
tick outlines the theory of the tendency for for the rate of profit to fall. The crisis
the rate of profit to fall and argues that this an overaccumulation
situation consists of
of capital relative to the amount of surplus
16 of value produced and realized. The crisis
Jacoby, "Politics Crisis," 33-8;
work is the source of a great deal can only be overcome through the reestab
Grossman's
of confusion Marxists. lishment of a rate of profit sufficient to
among contemporary
Mattick tends to share Jacoby's interpretation stimulate further accumulation. Real
of the intent of Grossman's analysis (1981, crises tend to manifest themselves first in
100-21), while other writers, particularly Itoh the of circulation as realization
sphere
(127-9) and Sweezy (209-13) see Grossman as
crises, but capitalist crises originate
developing a much more mechanistic theory. neither in the sphere of production nor in
This latter perspective results from what
the sphere or circulation, but rather in the
Jacoby suggests is a confusion of Grossman's
tendency for the rate of profit to fall.
critique of Otto Bauer and his own theory of
crisis. On balance, it seems that Jacoby's and Crises serve the essential purpose of
Mattick's of Grossman does restoring the conditions conducive to a

interpretation
more justice to the author's original intent. resumption of accumulation by reestab
lishing the lost proportionality between exacerbated the crisis tendencies of

surplus value and the production of capi State-induced is
capitalism. production
tal. This is accomplished both through the unproductive in relation to capitalist prof
destruction of a proportion of the value of itability and constitutes a drain on the
existing capital and through an increase in total of value. It thus
production surplus
the rate of surplus value. Mattick views absorbs a portion of value that can
surplus
crises as an inseparable part of the process enter into the accumulation of private cap
of capitalist accumulation, "capitalist ital heightening the crisis tendencies. In
development is a process shot through this context, the Keynesian welfare state
with, and inseparable from, crises in resorts to inflation as a device to resolve
which the requirements of the reproduc the crisis the rate of
by raising profit
tion of the capitalist mode of production a devaluation of the level of real
through
assert themselves in a violent wages. State to regulate
policies designed
way." (1981, 72) Mattick differs from the economy are merely governmental
Grossman in his treatment of crises as reactions to superficial market phenomena
essentially cyclical rather than secular fea whose root causes lie in the real relations
tures of capitalist economies, but concurs of production. "State reactions are there
in the view that they do not, of them fore just as blind as these processes them
selves, produce the final breakdown of the selves; if coincide at all with the
they
capitalist mode of production. History events on the
underlying developments
does nothing itself in the Marxian analysis market, it is by pure chance." (1978, 44)
of events; it is people who make their own The post-war form of state intervention,
history. "In in developed
principle in part a response to the crisis of the Great
capitalism any great crisis can become the Depression, has in turn contributed to the
final crisis. If it does not, it remains the current crisis. Mattick maintains that a
presupposition of further accumula new form of state intervention in response
tion." (1981, 121) While recognizing the to the current would crisis repre
merely
necessary connection between the objec sent one more in the continuous
stage
tive dimension of crisis and the subjective course of capitalist crisis and decay, lead
dimension of political consciousness, to the final crisis. (1981,
ing ultimately
Mattick makes no progress in specifying 160)
the terms or conditions under which a Mattick's of Marxian
interpretation
periodic crisis of capitalism might become crisis has influenced the
theory strongly
the final crisis. work of a number of contemporary Marx
ist theorists, who adopt the falling rate of
Mattick applies his theoretical
profit variant.17 This approach to Marxian
analysis of the nature of capitalist crises to
crisis theory has been subject to criticisms
a concrete treatment of crisis tendencies in
primarily based on the empirical observa
contemporary capitalism. He rejects the
tion that, to the extent it can be accurately
idea that the Keynesian form of state
measured, the organic composition of
intervention a role in sustaining the
played
capital has not risen continuously in the
strong rate of expansion in the post-war
manner predicted by Marx.18 These critic
economy. The real source of post-war
prosperity was the destruction of suffi
17
cient amounts of the years This group includes, among others, David
capital during
Yaffe, "The Marxian Theory of Crisis, Capital
of the Depression and World War II to
and the State," Economy and Society, 2
restore the conditions necessary for profit
(1973), 186-232; Mario Cogoy, "The Falling
able accumulation. In the short run, the
Rate of Profitand the Theory of Accumula
Keynesian form of state spending may tion," Bulletin of the Conference of Socialist
have improved the investment opportu Economists, 1 (1973), 52-65 and Shaikh.
nities but in the it 18
facing capital, long run, Sweezy, 100-5; Ronald Meek, "The Falling
isms are based on studies which have labour. Whether this process actually
to convert Marx's concept of results in a fall of the rate
profit of
attempted
the organic of a depends on
a variety of other factors, the
composition capital,
value relation, into price terms. Conse influences, which operate at
counteracting
their conclusions are questiona the level of surface appearances in actual
quently,
ble on the grounds of whether the statisti economies. Any of a number of
capitalist
measurable used to test these counteracting influences could be
cally categories
the proposition conform to sufficient in itself to offset the tendency
accurately
Marx's value categories. Most of the crit for the rate of profit to fall. A special dis
?
icisms fall wide of the mark to the extent tribution of technological change par
that the law was not intended to describe ticularly one which results in the introduc
observable market but rather, tion of innovations in certain sectors of
phenomena,
value relations.19 I, that is, innovations with a
underlying Department
? in a sta
The real problem with the falling rate capital-saving bias could result
of profit variant is that it emphasizes one ble or declining value composition of cap
of the tendency at the expense of ital throughout the economy as a whole.
aspect
the other. Authors such as Mattick have Lebowitz argues that the search for such
tended to focus on the exposition of "The economies would likely be heightened by
Law as Such" in chapter 13 of Volume a fall in the rate of profit.21
III, at the expense of the equally Another counteracting influence with

impor
tant aspects of the theory the the potential to offset the effects of the
involving
influences (outlined in "law as such" is a rise in the rate of
counteracting
14). As a number of critics have exploitation. higher A rate of exploitation
chapter
the law, as originally was conventionally thought of in terms of
recently argued,
must an extension of the working or an
expounded by Marx, necessarily day
include both aspects. In his discussion of increase in the intensity of the work pro
the role of counteracting influences, Marx cess. However, it could also occur by
stressed that they are as much a necessary means of a refinement of the labour pro
part of the process of capitalist accumula cess through the adoption of scientific
tion as the law itself.20 management techniques to generate greater
The law of the
tendency of the rate of productivity increases. Alain Lipietz,
profit to fall describes, at a high level of among others, argues that just such pro
abstraction, the process of increasing the ductivity gains (especially in the indus
social of labour the tries of Department I) underlay the inten
productivity through
substitution of embodied labour for living sive regime of accumulation that gener
21
Rate of Profit," in Economics and Ideology Lebowitz, "Marx's Falling Rate of Profit,"
and Other Essays: Studies in the Development 244. David Harvey cites several other sources
which support this interpretation of the signifi
of Economic Thought (London 1967), 142;
Geoff Hodgson, "The Theory of the Falling cance of the counteracting influences, although
Rate of
Profit," New Left Review,
no. 84 he himself opts for a different interpretation.
(1974), 70-4; Weisskopf, "Marxian Crisis See his The Limits to Capital (Oxford 1982),
Theory and the Rate of Profit," 371. 182. This point is similar, but not identical to
19 the one raised and others who
Ben Fine and Laurence Harris, "Controver by Hodgson
sial Issues in Marxist Economic Theory," in adduce statistical evidence to indicate that the
The Socialist 1976, ed. Ralph long-run tendency has been for the organic
Register,
Miliband and John Saville (London 1976), composition of capital to fall. Lebowitz's point
163-7. is a more contingent one which grounds the
20 innovation within the context of the
John Weeks, Capital and Exploitation process
(Princeton 1981), chap. 8; Fine and Harris, given relations of production prevailing in the
"Controversial Issues," 167. economy at a given time.
ated the substantial rise in the rate of Value, with that presented in
Surplus
the wave of The distinguishing feature of the
profit during long post-war Capital.
mature version of Marx's crisis theory
prosperity.22
is the on the over
The basic of these authors is emphasis placed
argument to the avail
production of capital relative
that the combined effects of the "law as
able working population. As the process
such" and
the counteracting influences are
of accumulation proceeds it occurs in
indeterminate. The exact nature of the
a capital-widening, rather than capital
interaction of the two forces in particular
deepening fashion. In a period of prosper
economies cannot be clearly specified.
ity, capitalists are likely to add additional
Any of the various influences identified
productive capacity based upon existing
by Marx have the potential to offset the
methods of production, rather than engag
effects of the rising social productivity of
ing in the widespread scrapping of exist
labour on the rate of profit. The contin
ing fixed capital and its replacement with
gent nature of Marx's original argument
newer
equipment embodying techniques of
undoubtedly accounts for the singular lack
production. The accumulation of capital
of consensus among most contemporary
under these conditions is accompanied by
treatments of this question. David Harvey an increased demand for labour which
suggests that much of the confusion
necessarily results in a rising level of wages
derives from the fact that Marx was
and increased pressure on profit
diverted from his original intention of
rates. (109)
emphasizing the inherent instability of the
The important question is why the
mode of production to a more
capitalist excess cannot be discarded at this
capital
tangential proposition of refuting the posi
stage of the accumulation process without
tion of the classical political economists. a dramatic
producing crisis. Itoh argues
According to Harvey, the essential point that it is not possible to comprehend this
which Marx intended to convey is that without the analysis of
process including
... the dynamics of technological and organi the credit system that Marx presents in
Part V of Volume III of Capital. Marx
zational change are critical for the stability of
and that the paths of change compat observed that fluctuations in interest rates
capitalism
ible with balanced growth are, if they exist at tend to be
closely associated with the
restricted. . . . The necessary tech business cycle, low interest rates corre
all, highly
and mix could sponding to the phase of prosperity, rising
nological organizational only
ever be struck and. . . rates to the turn in the cycle, and the high
temporarily by accident
the behaviour of individual tends to est rates to the period of crisis. The rate of
capitalists
de-stabilize the economic interest and the level of wages tend to rise
perpetually system.
under conditions of prosperity as
This is,. .. I would submit, the fundamental together
that lies buried within the falling the demand for additional labour and
proposition
rate of profit money capital both increase. The mecha
argument.23
nism which triggers the actual occurrence
of crisis is the
increase in speculative
The Overproduction of Capital Thesis activities. As rise due to the over
THE FOURTHVARIANT of the crisis theory, wages
accumulation of capital, market prices in
the excess capital theory due to the over
those sectors with a lower organic compo
of capital, has been presented
production sition of capital to rise reflecting the
begin
in a recentbook by Makoto Itoh, entitled bill. The higher level of
Value and Crisis. In the central of higher wage
chapter increases
also the demand for con
wages
the book, he contrasts the earlier versions
or the goods used to pro
Marx had devel sumption goods
of crisis theory which duce a rise in market
them, triggering
oped in the Grundrisse and Theories of
prices. As the prices of these commodities
22 "Derriere la crise: La tendance a la baisse du start to rise, unusual speculative stockpil
Revue 33 to squeeze the
taux de profit," Economique, ing of them will begin
(1982), 206-7. credit system, tightening the money mar
23 to Capital, 189. kets and on
Harvey, Limits putting upward pressure
interest rates. The overproduction of capi including the necessary outbreak of

tal thus causes three related develop periodic crises, constitutes the mechanism
ments: a rise in wages, increased pressure within the capitalist mode of production
on rates, and higher interest rates.
profit for adjusting value relations between
The profit levels of capitalists are
capitalists and between capital and
by both the higher wages and
squeezed labour. (116-8)
interest rates. (109-13) The variant of crisis theory presented
The of credit undermines
tightening by Itoh overcomes many of the limitations
speculative operations first, resulting in of the earlier variants. It presents a clear
cut-rate sales to pay outstanding bills.
and cohesive view of the mechanisms by
This in turn precipitates a decline
in prices
which crises operate to restore the condi
and a chain reaction of insolvency. Credit
tions of capitalist accumulation. How
institutions begin to restrict the supply of
credit to protect further con ever, it still suffers from a
tendency to
themselves,
the econ abstract one aspect of the process of crisis
stricting production throughout
omy and
accelerating the decline in from the totality of Marx's exposition of
employment. The expansion of the the dynamics of capitalist economies.
reserve army of labour intensifies the More Itoh bases
his interpre
specifically,
downward pressure on wages and restricts tation of crisis on one
theory aspect of
the consumption of workers, further
Marx's exposition in chapter 15 of Vol
reducing effective demand throughout the
ume III of while the dis
The crisis forces some firms Capital, ignoring
economy.
cussion of the earlier part of the chapter.
out of business and gives other capitalists
an opportunity to overcome the crisis The discussion of crisis presented in chap
because of the of ter 15 is intended to be the culmination of
immobility large
amounts of fixed "The super much of the analysis which precedes it. It
capital.
abundance of idle industrial must necessarily be read as a logically
capital,
unused loan capital, and unemployed integrated argument although the manner
laboring population, or low rates of profit, of exposition makes it difficult to do so.

interest and wages coexist, unable to com The
exposition in chapter 15 follows
bine in this period." (116) the main outline of the argument which
has preceded in the previous two chapters.
In this situation, the idle capital is
The first section recapitulates the argu
depreciated rapidly because it can no
ment that the pressure to increase the
longer be profitably operated. As the sur
social productivity of labour, inherent in
viving firms begin to amass new amounts
capital, also contains within it the self
of money-capital, they invest in new
destructive tendency to alter the condi
equipment new methods of
incorporating
tions required for profitable accumula
production which generally result in a
tion. The second section indicates that this
capital-deepening process. The firms
is not a unilinear trend, but one which can
which successfully reequip are able to
be offset by factors such as the raising of
commence profitable accumulation even
relative surplus value or cheapening the
at lower price levels. Theproportionality
factors of constant capital. "The two ele
between the departments of production is
ments embraced by the process of
restored through the process of renewed
accumulation, however, are not to be
investment and labour begins to be
regarded merely as existing side by side in
reemployed at lower wage levels
provid . . contain a contradiction
repose,. They
ing a higher rate of surplus value. As rela
which manifests itself in contradictory
tions among capitalists, and between capi
tendencies and phenomena. .. .From time
tal and labour, are restored, accumulation
to time the conflict of antagonistic agen
resumes at a higher rate of profit, and the
cies finds vent in crises."24
industrial cycle has run its course once
The thus presented, 24
again. business cycle, Vol. Ill, 248-9.
Capital,
Marx then proceeds in the third sec crisis cycle in the history of
experienced
tion of chapter 15 to deal with the specific capitalism fundamentally alters the forces
form in which the crises generated by and relations of production that constitute
these contradictory tendencies manifest the basis of the next industrial cycle.
?
themselves the relative overproduction Some of the confusion in Marxist crisis
of capital. This overproduction of capital theory has with the failure to
originated
is reflected in all the forms which have these effects of crises as a
incorporate
normally been confused for the different basic element of the theory. Not all Marx
sources of Marxian crisis theory. In David ist theorists have between
distinguished
Harvey's words, "The overaccumulation the typical crisis cycle and the way in
of capital in general can immediately be which crises have been transformed
translated into particular manifestations of through the different stages of capitalist
excess capital 'held up' in all of the states A notable to this
development. exception
it assumes in the course of circulation." rule is found in the work of Ernest Man
The typical cyclical crisis is characterized del. In three separate books written over
? an over
by the following phenomena the past decade and a half, Mandel has
production of commodities; surplus inven developed an analysis of the dynamics of
tories of constant capital inputs and par capitalist economies, which integrates an
tially finished commodities; idle capital interpretation of its crisis tendencies with
within the production process; surplus the historical pattern of its development.
money capital and idle cash balances; Mandel grounds his argument in a version
surpluses of labour power; and falling of crisis theory which does not reduce the
rates of return on capital advanced outbreak of crisis to a single causative fac
expressed as falling real rates of tor: "any factor is

single assumption
interest.25 clearly opposed to the notion of the
Thus, what is at issue is not so much capitalist mode
of production as a
the question of which variant of crisis dynamic totality in which the interplay of
theory best reflects Marx's original inten all the basic laws of development is neces
tion, but rather, the need to recognize that sary in order to produce any particular
all the variants have abstracted from his outcome." (1975, 39) Mandel identifies
analysis of the process by which the inher six variables essential to an analysis of the
ent contradiction between the forces and outbreak of crisis: the organic composi
relations of production are resolved. Most tion of capital in general and in the most
of the energy invested in the debates important departments; the distribution of
around crisis theory has arguably been constant capital between fixed and cir
directed to the wrong question at the cost culating capital; the development of a rate
of ignoring the real one. The
history of of surplus value; the development of the
capitalist development suggests that a rate of accumulation; the development of

more critical task for contemporary Marx the turnovertime of capital; and the rela
ist theory is to analyze the role that crises tions of exchange between the two depart
have played in the transformation of ments. The central dynamic which links
capitalist relations of production and the interplay of these six variables is the
ultimately, of the working class itself. "tendency for the various spheres of pro
duction and the various component parts
Ill of the value of capital to develop
Long Waves and Economic Crisis unevenly." (1975, 42) Mandel thus
shares the view that crises are the embodi
THE DEVELOPMENT of such an analysis
ment of the inherent instability of the
requires a recognition of the fact that each
capitalist mode of production.
25 Limits to Capital, 195. Mandel's most
Harvey, significant contribu
tion to the recent development of crisis The concept of the long wave in
theory has been his systematic differ capitalist economic development dates
entiation between the periodic upswings from the work of two Dutch Marxists, J.
and downswings of the industrial cycle van Gelderen and S. de Wolff, writing in
and the longer periods of capitalist expan the early decades of the twentieth century.
sion and decline which he associates with The economist generally given credit for
the fundamental transformation of the the pioneering work on the concept, how
technological base. He maintains that ever, is a Russian, Nicolai Kondratiev.

most Marxist analyses have considered Kondratiev's theory of the long wave was
the movement of the average rate of profit derived from his observation of trends in
in two different time frames: the shorter the fluctuation of nineteenth-century price
term of the industrial cycle (analyzed by series. The occurrence of long waves was
Marx) and the life cycle of the capitalist explained in terms of the durability, pro
mode of production (at issue in the break duction period, and investment amount of
down controversy). A third
time frame, particular types of capital goods. The
that of the long cycle (or long wave) must source of the long cycle is the tendency of
be introduced to provide both a consistent these basic capital goods, including large
theoretical analysis and to insure that plants, railways, canals, and other
theory conforms to existing empirical infrastructural projects, to be built in clus

data.2* (1980, 11) ters. The tendency for capital investment
The periods of expansion and decline to cluster is the product of the availability
associated with cycles corre
the long of loanable funds. At the beginning of the
spond to changes in the organic composi expansion period, the supply of loanable
tion of capital and the rate of profit on the funds is large and available at low interest
basis of an level of rates. As investment the supply
existing productive proceeds,
technology. Each shift from the down of funds dwindles and interest rates rise,
ward phase of the long cycle to an causing the pace of investment to slacken.
upswing is associated with the transforma The decline in major capital investments
tion of the technological base of the triggers the long period of the downturn.
capitalist mode of production. The history The decline of investment in turn eventu
of international capitalism consists of four ally generates a rise in savings, low
such long cycles of approximately 50 interest rates, and
falling prices, creating
years' duration: from the end of the eigh the conditions for a new upswing.28
teenth century to 1847; from 1847 to the While Kondratiev claimed to base his
beginning of the 1890s; from the 1890s to theory of the long wave on insights
the World War II; and from World War II derived from Marx, his argument has not
to the present.27 (1975, 120-1) been universally accepted by Marxists.
Kondratiev's conclusion that the fluctua
26 tions in investment levels over the
Due to the terrible lack of consistency in the long
deviations from a long
way the respective terms are used by different cycle represented
writers, in this review the terms long wave and term equilibrium implied that endogenous
long cycle of roughly fifty years consists of an factors within capitalism tended to restore
expansionary phase and a contractionary
phase. ed., Long Waves in the World Economy (Lon
27
While Mandel is the most
important contem don 1984).
28
porary Marxist theorist of long waves, he is J.J. van Duijn, The Long Wave in Economic
merely one of a number of writers who have Life (London 1983), 64-8. A similar account of
contributed to the revival of interest in this area Kondratiev's theory is provided in Richard
of economic theory over the past decade. A B. Day, "The Theory of the Long Cycle:
representative sample of these different posi Kondratiev, Trotsky, Mandel," New Left
tions can be found in Christopher Freeman, Review, 99(1976), 76-7.
the economy to its long-term growth pat with basic innovations, such as railroads,
tern. Kondratiev argued that his theory of and motor cars.32
electricity,
the long cycle was the logical complement as
Schumpeter's view of long cycles
to Marx's theory of the role of crises in an inevitable part of the capitalist process
regulating the shorter industrial cycle of
led him to the conclusion that a purely
ten years' duration. However, as Richard
economic breakdown of capitalism was
has noted, this position was
Day rejected
highly unlikely. Writing in 1942 in
by Trotsky, who argued that long cycles
Capitalism, Socialism and Democracy,33
were governed by the unpredictable part of which has been reproduced as Can
occurrence of external events, such as the
Capitalism Survive?, he argued that
absorption of new countries and conti
depressions of the severity experienced
nents, the of new natural
discovery
during the 1930s occurred with periodic
resources, and superstructural factors, were
regularity in capitalism. They in
such as wars and revolutions.29 themselves part of the long cycle which
Kondratiev's views were unac
equally reflected the process of creative destruc
ceptable to more orthodox Soviet critics tion that imbued capitalism with its
who denounced the theory for its
dynamic nature.
bourgeois optimism.30 These revolutions the
periodically reshape
of existing structure of industry by introducing
One the most
important treatments
new methods of production. . . new com
of thequestion of long waves was pro
modities . . . new forms of organization. . .
vided in Joseph classic
Schumpeter's new sources of supply . . . new trade routes and
study of business cycles.31 Schumpeter markets to sell in and so on. . . .Thus there are
treated the long wave as one of three basic
prolonged periods of rising and falling prices,
types of fluctuation in business interest rates, employment and so on, which
activity
intrinsic to capitalist economies. For constitute parts of the mechanism
phenomena
Schumpeter, the source of fluctuations in of this process of recurrent rejuvenation of the
business activity was the innovation pro productive apparatus. (8)
cess. He regarded the process of innova While was
Schumpeter ultimately pes
tion as essentially discontinuous. Innova simistic in answer to the question he had
tions tend to appear in swarms due to the his reasons had more to do with the
posed,
nature of entrepreneurial activity. The of
"superstructure" capitalist society (a
appearance of one or more entrepreneurs which shall be discussed in more
point
with the ability to develop and implement detail below).
new innovations paves the way for others Mandel has the concept of
integrated
and initiates an trend. The
accelerating the long wave with the theory of the ten
variations in fluctuations between the of the rate of profit to fall to explain
dency
three of ?
types cycles the short the rate of profit tends to rise over the
why
(Kitchen), intermediate (Juglar), and long and to fall in the con
expansionary phase
?
(Kondratiev) cycles is accounted for by A persistent decline in
tractionary phase.
the different impacts of different types of the rate of profit over a lengthy period
innovations. He associated the long cycle occurs when the counteracting tendencies
are relatively weak and conversely, the
expansive phase of the long wave occurs

29 when the counteracting tendencies are at
Day, "The Theory of the Long Cycle," 71.
30 work in a strong and synchronized fash
Richard B. Day, The 'Crisis' and the
'Crash': Soviet Studies of the West, 1917-1939 ion. In his most recent work on the sub
(London 1981), 54-5, 91-4. ject, Mandel draws an important distinc
31
Schumpeter, Business Cycles, A Theoreti
32
cal, Historical and Statistical Analysis of the van Duijn, The Long Wave, 97-106.
33
Capitalist Process, 2 vols. (New York 1939). (New York: Harper and Row, 1942).
tion between the transition which occurs Mandel links each of the four succes
at the peak of the expansionary phase and sive waves (and their associated
long
that which occurs at the trough of the con with a different form of
technologies)
tractionary phase. While the long-run of the labour process. Each
organization
trends in the rate of profit accurately of an individual wave is also char
phase
describe the trend of the wave once it is acterized by a different degree of stability
initiated, as well as the transition from an in the labour process. The long expansive
expansionary phase to the contractionary in the upward of the wave is
period phase
one, the end of a period of stagnation and associated with little in
relatively change
the transition to a renewed period of the organization of the labour process.
expansion can only be explained by The form of organization is tied
existing
extra-economic factors. These factors to the technologies which The
prevail.
include wars of conquest, extensions and of the rate of profit reduces the
adequacy
contractions of the area of capitalist oper incentive for capitalists to undertake radi
ation, intercapitalist competition, class cal in the labour process and the
changes
struggle, revolutions and counterrevolu relative of the period makes
prosperity
tions, among others.34 (1980, 21) loath to precipitate the inten
capitalists
Mandel makes a significant connec sified class which in the
struggle changes
tion between the shift in the phases of the labour process would induce. The prevail
long wave and periods of intensive tech
ing stability is upset during the downward
nological innovation as well as variations of the wave. Class inten
phase struggle
in the intensity of class struggle. The shift sifies as to realize a
capitalists attempt
from the downward phase to the upward rate of value. Conse
higher surplus
one is associated with an intensive period quently, they are less concerned with the
of technological innovation.35 The degree of wholesale in the
implications changes
of innovation is greatly retarded during labour process. Historically, major
the downward phase of the long wave in the labour process are initiated
changes
because the profit expectations of entre in an form towards the end
experimental
preneurs are not high enough to justify the of the and become
expansionary
phase
massive investments in new technology. the economy dur
generalized throughout
When the expansionary commences The outcome
phase ing the depressive phase. is
and rates of profit rise, capitalists find a determined the of
partly by intensity
large reserve of innovations readily avail
working-class resistance. Thus subjective
able for application. The application of factors, not factors as
endogenous (such
these new innovations on a massive scale the periodicity of the long waves) deter
constitutes a sustaining factor of the mine the duration of the depressive
expansionary phase. (1980, 25) phase. (1980, 55)
Mandel applies his theory of the long
34 wave to analyze the development of west
In drawing this distinction, it appears that
Mandel has been sensitive to the criticism ern capitalism since the end of World War
levelled against the ambiguity of his argument II. The expansionary phase which com
in Late Capitalism by Richard Day in "The menced at the end of the war was the prod
Theory of the Long Cycle," 79-82, and has uct of several factors. The most impor
clearly associated his own position with that of tant was the of real wage
suppression
Trotsky, as opposed to that of Kondratiev.
35 levels resulting from the political defeat
Mandel shares this view in common with
of the working class at the hands of fas
Kondratiev's work,
original as well as that of
cism and the reconstitution of the reserve
Schumpeter, although he clearly differs in his
of the source of fluctuations in army of the unemployed during the
interpretation
the long wave, cf. van Duijn, The Long Wave, depression years. The consequent
93-111. increase in the rate of surplus value was
sufficient to stimulate a new wave of a loss of the basic against

protection
investment. The level of invest and won in the
higher unemployment poverty
ment activity led in turn to an increased post-war period.
pace of innovation associated with the
The outcome of the current crisis
third industrial revolution and the long
depends on the result of the social and
term expansion of the market on a world
political struggles that will mark the com
scale. The expansionary phase of the
ing years. To restore the conditions neces
wave was sustained until the late 1960s by sary for a resumption of profitable
the absorption of large numbers of foreign
accumulation and the expansionary phase
and agricultural workers into the labour
of the next wave, "the capitalists must
force of the advanced economies. Class
first decisively break
organizationalthe
struggle over the rate of surplus value
strength and militancy of the working
intensified in the late 1960s with the con
class in the key industrialized countries."
traction of the reserve army of the unem
(1980, 113) This constitutes a much more
ployed resulting from the absorption of
formidable challenge for capital than it
the readily available reserves of labour.
did in the 1930s. The attack on labour's
This signaled the end of the expansive
strength and organization is likely to
phase of the long wave. The intensifica
stimulate an increase in the level of class
tion of inter-imperialist rivalry in the
consciousness and the emergence of a new
same period provided an additional con
vanguard of radicalized workers.
In Man
straint on the strategies available to
del's estimation, the great strength of his
capitalists. (1975, 168, 180,442)
theory of long waves of capitalist develop
The end of the expansionary of ment is that it does not preclude the possi
phase
of a renewed wave of in
the long wave was visibly manifested in bility expansion
the recession of the mid the early 1990s.However, he believes that
generalized
1970s. In The Mandel the social and human costs of the defeat of
Second Slump,
documents the nature and inten the working class necessary for the
specific
In so he resumption of growth will make the priva
sity of the recession. doing,
extends his of waves to tion experienced during the Great Depres
analysis long
the of the sion pale in comparison. While recogniz
include specific characteristics
the wave. ing the possibility of such an outcome, he
downswing of fourth The
of the current wave is convinced that socialism constitutes the
depressive phase poses
a particularly only viable alternative open to late
serious threat for capitalist
hegemony because of the exceptionally capitalism.
high level of organization, numerical Mandel's resurrection of the theory of
strength and combativity of the industrial long waves adds an important dimension
working class, and the political vulnera to contemporary Marxist crisis theory in
bility of existing bourgeois regimes. The its attempt to overcome the dichotomy
growth of inter-imperialist rivalry, the between the short-run theory of cyclical

related shift of crises and the debate over the long-run
closely productive
activities to the newly industrializing tendency of capitalism to break down.
countries of Asia and Latin America and Further, his analysis of the link between
the growing recourse to protectionism fur the successive phases of the long wave,
ther increased the severity of the reces the acceleration of the pace of technologi
sion. The generalized recession of the cal innovation, the reorganization of the
1970s represents an attempt to force labour process, and the variations in the
workers to accept falling real wages, a strength, cohesiveness, and militancy of
deterioration of conditions, an the class mark a
working organized working
intensification of the work process to unique contribution to Marxist theory.
extract a higher level of surplus value, and Most importantly, Mandel's theory
suggests that the cyclical crises associated of the crisis, he insists that the "social
with periodic fluctuations in the trade structure of accumulation" contributes as
cycle have significantly different effects much to the restoration of a long period of
than the prolonged periods of structural expansion as the narrowly economic fac
crisis associated with the depressive phase tors.36 Mandel rejects Gordon's argument
of the long wave. The more severe struc in his insistence that "the outcome of the
tural crises associated with the long wave depressive long wave is not predeter
tend to revolutionize the mined," thus missing the point that social
technological
base of and the and political factors are as constitutive of
production reorganize
labour process itself as part of the process long periods of growth as more narrowly
which lays the basis for the next period of economic factors. (1980, 52) Conse
expansion. quently, he is forced to resort to two ana
In spite of of lytically different principles to explain the

the obvious significance
a origins of the transition at the peak and the
Mandel's contribution, it suffers from
number of limitations. While he insight trough of the long wave, undermining the
the critical role played consistency of his theory. Although one

fully recognizes by
can sympathize with his desire to avoid
structural crises in the reconstitution of
the base of the economy, he the criticisms levelled at Kondratiev, the
productive
does not acknowledge the equally resulting inconsistency is unnecessary. If
impor
tant one accepts the principle that the only
transformative implications they have
for factors. This is limit to capital is conscious human sub
superstructural
reflected in his discussion of the post-war jects (as Lebowitz argues), there is no
economic role of the state in Late need to insist that the transition from the
He attributes the significant depressive to the expansive cycle of the

Capitalism.
increase in the degree of state intervention long wave cannot be generated
by
to three factors: the shortening of the turn endogenous factors, the concept
crisisof
over time of fixed capital, the acceleration signifies the dual possibility of transfor
of technological and the enor mation and renewal. Thus, the structural
innovation,
mous increase in the cost of major crisis provoked by the depressive phase of
proj
ects of accumulation due to the each long wave contains both pos
capital
third technological revolution. While he sibilities. The important challenge is to
that the expanded role of assess the factors which contribute to one
acknowledges
the state is also linked to the "periodic
emergence of [the working class] as an

36
independent force in
political con Gordon defines this concept as the simple
flicts," (1975, 486) he fails to see that the social aggregation of the structures of the con
form and content of state intervention stituent institutions necessary for rapid
very
a accumulation, cf. his "Stages of Accumulation
in post-war capitalist economies is both
and Long Economic Cycles," in Processes
of the resolution of the struc of
consequence
the World System, Vol. 3 oi Political
tural crisis of the depressive of the Economy
phase
of the World System Annuals, ed. Terence K.
last long wave and a precondition for the
Hopkins and Immanuel Wallerstein (Beverly
expansive of the post-war wave. Hills
phase 1980), 17. Much of the same argument is
His reluctance to afford an reproduced in David M. Gordon et al., Seg
integral
role to political mented Work, Divided Workers: The Historical
and social factors in the
and resolution of structural Transformation of Labor in the United States
emergence
(New York 1982), chap. 2. The linking of
crises is reflected in his criticism of David
social and economic structures of accumulation
Gordon. Gordon argues that the resolution
suggested inGordon's work bears an affinity to
of a long-term structural crisis is endogen the concept of regulation and the notion of
ous to the system, but the crisis
recognizing developed by Aglietta, Theory of
importance of social forces in the outcome Capitalist Regulation, 9-17.
outcome over the other in the context of a

long wave is the decline in the rate of
particular crisis. occasioned by shifts in the capital/

profit
Mandel's to pursue such a labour ratio. (1980, 21-4)
willingness
line of analysis is seriously constrained Frank does not draw the distinction
by
his political commitment. His into Mandel makes between the endogenous
insight
the relationship between the depressive nature of the factors contributing to the
of the long wave, the reorganization shift from the upswing to the downswing
cycle
of the labour process and the incentives to of the long wave and the exogenous nature
innovation offers an of the factors triggering a renewed period

technological
invaluable into the of expansion. The downswing of the long
insight process
class intersects with wave is a period of extended crisis laying
whereby struggle
crisis to change and the basis for the expansion that follows.
capitalist reproduce
the mode of production. The extension of For Frank, a crisis does not necessarily
this can serve as the basis for an signal the breakdown of the process of
insight
of the role of crisis in the recon capitalist accumulation, but rather a turn
analysis
stitution and reorganization of the work ing point when existing social, political,
to a and economic relations are transformed:
ing class. However, his commitment
traditional form of revolutionary Marxism
The crisis is a period in which a diseased
precludes the possibility of such an
social, economic and political body cannot live
analysis. In the end, he reverts to the on as before and is obliged, on pain of death, to
assertion that the application of correct transformations that will give it a new
undergo
political practices by the working class lease on life. Therefore, this period of crisis is
can overcome the incomprehensible suf a historical moment of danger and suspense
that is necessary for the resumption during which the crucial decisions and transfor
fering
of the expansionary of the next mations are made that will determine the future
phase long
wave. The of development of the system and its new social,
implications Mandel's
economic and political base. (1981, 111)
analysis deserve a more substantial treat
ment than he has afforded them and they He the of change
analyzes process
will be pursued in the last section of this which gave rise to thelong wave of post
review. war in terms of the same crit
expansion
Andre Gunder Frank's
analysis of the ical variables by Mandel:
identifed the
current crisis reveals of the same destruction of of capital
large
quantities
many
concerns that characterize Ernest Man stock by the Depression and World War
del's Frank the discus II; the restriction of real wage levels by
writing. integrates
sion of crisis and waves into the the experience of fascism and the Depres
long
world that he and sion; and the reestablishment of a stable
systems perspective
other writers, such as Immanuel Waller international financial and trading regime.
stein, have formulated in their work on The end of the expansionary phase was
Frank that the first manifested in the fall in the rate of

underdevelopment. agrees
crisis which emerged in the 1970s is the profit in the late 1960s and accelerating in
manifestation of the "B" or depressive the 1970s. The resulting stagnation of the
of the current wave of 1970s was characterized by falling levels

phase long
He is in general of employment, rates of capacity utiliza
capitalist growth. agree
ment with Mandel's of long tion, productivity levels and GNP, exacer
periodization
with the first wave in bated by government policies to
waves, commencing initially
the 1790s and extending to the prolong the boom and subsequently by
present
fourth wave. He also that the crit more restrictive policies. (1980 chap. 3)
agrees
ical factor in determining the duration of By the end of the decade, the international
the and the transition from the economy was firmly embarked
upswing capitalist
to the depressive of the on a path of economic decline which bore
expansive phase
all the marks of a classic crisis. economy is the spreading rationalization

capitalist
The prerequisite of a renewed wave of of production in the industrial economies
is a radical of through the application of advanced tech
expansion reorganization
the technological and
social basis of pro nologies.
duction: excess capital must be written Frank differs from most con
sharply
off; costs of production must fall; technol Marxist theorists of crisis in his
temporary
ogy and the labour
process must undergo to that the current
willingness accept
deep-seated changes; labour costs must be crisis may well result in a restoration of
reduced; the spatial and sectoral distribu the conditions required for capitalist
tion of production must be modified accumulation. While not the role
denying
throughout the world; and the rate of which conscious human subjects must
profit must be raised through a massive in the revolutionary transcendence of

play
social and political struggle between capi capitalism, his reading of the current
tal and labour: political shift to the right in the industrial
economies, the resurgence of nationalist
If world capitalism has again entered a major
and religious sentiment in the developing
crisis of accumulation, as we believe, another
economies and the growing integration of
major capitalist investment boom cannot take
in reorganiz the eastern economies into the world
place until capital has succeeded
ing capitalist production on a new basis ? capitalist system leads to a pessimis
him
either with the willing collaboration of labor, tic view of its current potential. He con
or by obliging labor to accede against its cludes that his "observations and formu
will. (1980, 98) lations that there is a single world
suggest
of capitalist system, which is undergoing
One the important contributions
another in a series of long cycle crises
which Frank makes is to stress the extent
from which it is likely to be able to
to which the current crisis of capitalism is
recover through far-reaching and deep
truly a crisis of the world capitalist econ
going economic, social, political and cul
omy. He analyzes in detail the growing
econ tural readjustments." (Amin et al., 1982,
integration of the eastern European
omies into the world capitalist system
161)
(both as markets for western goods and Frank's pessimistic conclusions
and as production sites), thus regarding the likely outcome of the cur
technology
their of rent crisis differ sharply from those of his
reducing degree imperviousness
to western crises. (1980, chap. 4) The recent collaborators, Samir Amin,
crisis in the West is transmitted even more Giovanni Arrighi, and Immanuel Waller
rapidly to the countries of the Third World stein. Wallerstein shares Frank's interpre
through the international trade and pay tation of the nature of the long waves of
ments mechanisms. The increased migra capitalist growth while the other two tend
tion of capitalist to free to regard the concept as dangerously
enterprise produc
tion sites in southeast Asia, Latin abstract and are concerned that it leads to
America, and the other indus an excessive "economism." While all

"newly
countries" represents an four authors believe it unlikely that the
trializing impor
tant component of the capitalist response current crisis will lead to a socialist trans
to the crisis. The emergence of the New formation, Amin, Arrighi, and Waller
International Division of Labour, that is, a stein believe that the eventual demise of
world market for labour and world capitalism is virtually inevitable.
production
sites, constitutes part of the "They believe this to be so because they
profound
transformation of world capitalism occur believe, as did Schumpeter, that it is
successes
ring in the context of the depressive phase capitalism's that will breed its
of the current long wave. A related feature failure; that the more capitalism expands,
of the current transformation of the world recuperates oppositions, and adjusts diffi
culties, the more it is led into impasses can be attributed to the Hegelian influence
from which there is no exit." Frank on Marx. The Hegelian influence contains
remains much more pessimistic; although both for the
analytical principles interpre
he does not insist that capitalism is eter tation of history and incorporates ele
nal, he fails to foresee the configuration of ments of view of
Hegel's teleological
forces on a world scale that can human as involving progress
political development
its demise. (Amin et al., 1982, towards the manifestation of reason in
signal
243) human affairs. Although Marx claimed to
Without necessarily agreeing with all stand Hegel on his head in substituting his
of Frank's conclusions, it is important to materialist dialectic for Hegel's philo
recognize that in many respects his view sophical dialectic, the teleological ele
of the nature and role of capitalist crisis ments were carried over relatively
captures much of Marx's original intent. intact.37 In spite of the evolu
significant
Crisis is a mechanism of adjustment tion of Marx's over a
thinking 40-year
which allows capital to overcome an inter the analytical basis for the revolu
period,
nal barrier to its continued self-expansion. tionary mission assigned to the working
Crises are thus necessary in this functional class remained rooted in Hegelian
firmly
sense for the continued self-expansion of The extrication of Marxist
teleology.
but such a regeneration of the crisis from that is a pre
capital, theory teleology
accumulation process is not inevitable. requisite for an analysis of the full range
Frank thus stands out from the majority of of possible outcomes to the current crisis.
contemporary Marxist theorists in his The extension of Marxist crisis theory

willingness to recognize the continued in the direction a
proposed requires
of capital as an equally reevaluation of the historical
self-expansion significance
logical possibility of a given historical of crises. The essential role of
capitalist
crisis. He stops short of suggesting what crises, the structural
capitalist particularly
form the reconstituted relations of produc crises associated withthe depressive
tion might take or the implications of the
phase of the
long wave, has been to trans
current crisis for the reconstruction of the form the existing relations of production.
but his in In so doing, the nature
working class, analysis points they revolutionize
that direction. of thelabour process and alter the nature
of the working class itself, in order to
IV facilitate the continued accumulation of
capital. The dynamic conflict between

of the Current Crisis and has been the driving
Implications labour capital
force behind the crisis-laden development
MARXISM REMAINS BEDEVILLED by the of the capitalist mode of production. As
tension between the two pos
ongoing James O'Connor has observed,
sibilities contained within the theory of
Worker struggles were motors of capitalist
? that of trans
crisis that of renewal and sense of strengthening
development in the deep
formation. Each crisis may potentially be
a transformation or
resolved by means of
37
a reconstitution of the relations of produc Andre Gorz, Farewell to the Working Class:
An Essay on Post-Industrial Socialism, trans.
tion. However, much of recent theorizing
Michael Sonenscher (Boston 1982), 16-22;
has focused on the role of the current
Anthony Giddens, A Contemporary Critique of
crisis in generating the preconditions for
Historical Materialism, Vol. 1: Power, Prop
the transition to socialism to the exclusion
erty and the State (Berkeley and Los Angeles
of an analysis of its for the
implications 1981), 73; a similar point is emphasized by
reconstitution of capitalist relations of Chantal Mouffe in "Working-Class Hegemony
and the Struggle for Socialism," Studies in
production.
This inMarxist crisis Political Economy, no. 12 (1983), 8-13.
blindspot theory
a model of accumulation which in the course of tive subordination of labour within the
crises periodically subverted the workers' own
production process.
social bases of resistance by recomposing labor The restructuring of the labour process
and the work force itself.38 was associated with the increased
mechanization of manufacturing. Recent
The
precise effect that crises have had of in the labour
studies changes process
on the reconstitution of the labour process have between sec
distinguished primary,
and the working class has varied with of mechaniza
ondary, and tertiary forms
each successive stage of capitalist devel tion. The diffusion of the steam engine
opment. Itoh notes that the nature of ini
during the mid-nineteenth century
crises underwent a significant change dur
tiated the transition from manufacture to
ing the late nineteenth century. The flow
machinofacture and constituted the basis
of British capital investments overseas, of Towards the
primary mechanization.
the commencement of the railway era, end of the century, the technical superior
particularly in North America, and the
ity of the internal combustion and electri
growth of the iron and steel industries
cal engines resulted in their gradual
introduced fundamental changes in the
replacement of the steam engine. The
organization of capitalist production and
most significant consequence of primary
the international financial system. As a
mechanization was the increase in the
consequence of these
changes, the depres
speed and scale of the transformation pro
sion which commenced in the 1870s
cess as part of industrial activity.39
proved to be longer lasting than previous
The increase in productive capacity
crises. The increased returns on
cyclical from mechanization
resulting primary
British financial invested overseas
capital a growing recognition of the
generated
postponed the immediate financial impact limitations of existing transfer systems for
of the crisis and delayed the process of
moving components between the various
and existing excess
depreciating replacing transformative locales in the process. The
capital. (141-2) overall of the productive
efficiency pro
During this period of chronic stagna cess was further retarded the
by signifi
tion, the expansion of productive capacity cant conflicts which emerged in this
in German and American industry began between of skilled machin
period groups
to challenge the hegemonic position of ists to maintain their traditional
trying
British capital. The accelerating concen control over the labour and man
process
tration of capital and the growing The
integra agement. problems engendered by the
tion of financial and industrial
capital lack of coordination of the transfer pro
through the rise of
joint stock
the com cess and the conflict over control were
pany gave rise to the modern oligopolistic resolved in the twentieth
gradually early
firm. Increased international rivalry the introduction of the
century by
between the major capitalist powers of scientific
Taylorist principles manage
opened a new phase in colonial expan ment. This combinedthe systematic
sion, leading to the modern form of of work, the interchangeabil
organization
was use of
imperialism. Capitalist production ity of parts and the specific
transformed by a radical restructuring of machines for the efficient transfer of dif
the labour process and the introduction of ferent of production
components through
new technological principles, which rep different of the process.
parts Together
resented an attempt to raise the rate of these constituted the of
changes phase
surplus value through an intensification of mechanization that
secondary propelled
the rate of exploitation and the more effec the of the third wave of
upswing long
38 39
James O'Connor, Accumulation Crisis Rod Coombs, "Long Waves and Labor
(London 1984), 49. Process Change," Review, 1 (1984), 678-9.
Michel ously to become the numerically domin

capitalist expansion.40 Aglietta
denotes the organization of the labour pro ant component of the population, the
cess associated with the stage of second industrial working class reached its
as "Fordism." absolute in most industrial countries
ary mechanization peak
in the decades from 1890 to 1910 (surpas
Fordism furtherdeveloped the mechanization 50 cent of the population in Bel
sing per
of labour, increased the intensity of work,
gium alone) and has declined progres
radicalized the separation between manual and
sively since. As Adam Przeworski has
mental labour, rigorously subjected workers to
perceptively noted, the incontrovertible
the law of accumulation and turned scientific
reality of this fact has altered the nature of
progress against them as a power serving the
uniform of value.41 working-class politics in the capitalist
expansion
democracies forever.42
The transformation of the
resulting
The reconstitution of the relations of
labour process had
profound implications
for the development of the working class production in the early twentieth century,
in the twentieth The mechaniza itself a response to the last great crisis of
century.
tion of production undercut the the nineteenth century, laid the basis for
greatly
historical of craft workers and the next crisis of the 1930s. The growing
strength
intensified divisions between craft and of oligopolistic firms, cou
predominance
industrial workers. Combined with the pled with the substantial rise in productiv
in the aftermath ity occasioned the process of second
defeats suffered by labour by
a new form
of World War I, and the rise of company ary mechanization, produced
unions, in North America, of monopolistic price behaviour which
particularly
these weakened the posi erected a barrier to the continued self
developments
tion of the organized working class. The expansion of
capital. By the mid-1920s,
levels of productivity by substantial excess capacity in the form of
higher generated
the greater mechanization of production fixed capital had begun to reappear, par
meant that a smaller proportion of the ticularly in the American economy. The
active labour force needed to engage in of excess was inten
problem capacity
manual labour in order to sustain a higher sified the restrictive effect that the
by
standard of living. The more highly dif exerted on the consuming
oligopolies
ferentiated division of labour between the power of the mass of industrial and
and managerial aspects of produc salaried workers. The existing excess
design
tion, on the one hand, and the physical capacity and restricted consuming power
on the other, a radical had led to a decline in the level of capital
aspects, produced
transformation of the occupational class investment in the American economy by
structure. Rather than growing continu the decade of the 1920s. (Steindl, 166-7)
At the same time, the excess money capi
40 cf. also concentra
Coombs, "Long Waves," 680; tal generated by the increased
Mandel (1980, 42-6); O'Connor, Accumula tion of finance the great
capital produced
tion Crisis, 41-6. boom that characterized the
41 speculative
Aglietta, Theory of Regulation, 117-8; the the decade. The end of the
last years of
concept of Fordism, while derived from
boom in the stock market crash of 1929
Gramsci's use of the term in The Prison
signalled the onset of the crisis. The
Notebooks, is based on the discussion in Chris
From For crisis, which originated in the United
tian Palloix, "The Labour Process:
dism to neo-Fordism," in The Labour Process States, spread to the other capitalist
and Class Struggle, CSE Pamphlet no. 1 (Lon
"
don 1976), 46-7; cf. also Mike Davis, 'For
42 "Social as an His
dism' in Crisis: A Review of Michel Aglietta's Przeworski, Democracy
et crises: Vexperience des Etats torical Phenomenon," New Left Review, 122
Regulation
Unis," Review 2 (Fall 1978), 213-17. (1980), 39-40.
countries through the collapse of the inter accumulation. The new mode of regula
national financial regime.43 tion emerged as a largely unintended con
The Great Depression of the 1930s sequence of working class resistance to
was the most severe crisis experienced the impact of the crisis. The rise of indus
since the advent of capitalism. The crisis trial unionism in the United States in the
signalled a rupture between the new inten context of Roosevelt's New Deal
political
sive regime of accumulation associated the impetus for the institutionali
provided
with the Fordist reorganization of the zation of collective bargaining relations
labour process and the prevailing mode of which guaranteed that the real wages
regulation.44 The economic crisis of the increased in line with productivity in

gains
1930s was mirrored in the political crisis the post-war era.45 An additional factor
embodied in the rise of fascism and the that contributed to the new mode of regu
ensuing military conflagration of World lation was the concessions made by the
War II. While the resolution of the crisis state in the area of social reforms (sym
depended to a large extent on the outcome bolized by the Beveridge White Paper on
of the war, the basis for the post-war Social Insurance and Allied Services in
return to prosperity rested upon the the United to secure
Kingdom) popular
institution of a new mode of regulation consent for the massive mobilization
corresponding to the Fordist regime of for the war effort.46
required
The resolution of the crisis of the
43 " 1930s, partly through the institution of a

Seethe discussion in Davis, 'Fordism' in
new Fordist mode of regulation, resulted
Crisis," 222-5; and Itoh, 144-9.
44 in an extension and deepening of the role
Regime of accumulation and mode of regu
of state ?
lation are terms employed of the the in capitalist economies
by members
school of France. of referred to as the foundation of democra
regulation Regime
accumulation is defined as "a systematic mode tic capitalism.47 The basis of democratic
of dividing and reallocating the social product, was a compromise which left
capitalism
which achieves over a long period a certain the investment decision-making process
match between the transformation of the condi
in the hands of private enterprises while
tions of production . . . and transformations in
the state assumed responsibility for pro
the conditions of final consumption. ..."
viding stable levels of employment and
Mode of regulation is defined as "the ensemble
of institutional the networks, the income. It included acceptance of a com
forms,
or implicit norms, which assure the mitment to maintain adequate levels of
explicit
compatibility of behaviours in the framework support for those individuals unable to
of a regime of accumulation, in conformity for their needs direct
provide through par
with the state of social relations, and thereby in the labour market. This com
ticipation
with the contradictions and the conflictual mitment was embodied in the institution
character of the relations between agents and of social insurance programmes to deal
social groups." Alain Lipietz, "The Globali
with old age, unemployment, ill-health,
zation of the General Crisis of Fordism,"
and a variety of disabilities. The ensemble
Studies in National and International Develop
ment Occasional Paper No. 84-203 (Kingston
45 "
1984), 6, 8. The concept of mode of regulation Davis, in Crisis,"
'Fordism' 225-9.
46
employed by Lipietz bears a strong affinity to Richard M.
Titmuss, "War and Social Pol
David Gordon's notion of the social structure icy," in Essays on 'The State', 2nd
Welfare
of accumulation discussed above. While the ed. (London 1963), 85-6.
47
concept of long waves is explicitly eschewed Adam Przeworski and Michael Wallerstein,
by members of the regulation school, it is pos "Democratic Capitalism at the Crossroads,"
sible to conceptualize the different regimes of Democracy, 2 (1982), 54; cf. also Joachim
accumulation and modes of regulation as corre Hirsch, "The Fordist Security State and New
sponding to the various long waves of capitalist Social Movements," 10/11
Kapitalistate,
expansion. (1983), 76-80.
of new institutional roles for the state in diffusion of the processes of

widespread
democratic capitalism ideologifound its secondary mechanization, accelerated
cal rationale in the theory and practice of rapidly under the economic stimulus of
Keynesianism. The real genius of Keynes the boom. The technological pattern
ianism was its success in harnessing
underlying the fourth long wave was char
workers' reaction to the intensification of acterized the growth of a new layer of
by
the labour process to tie the level of wages white-collar workers between managers
and social consumption to increases in and supervisors, and the reduction in the
productivity.48 number of manual workers required for a

The final element in the post-war given level of output, although absolute
reconstruction of the social relations of increases in levels of output concealed the
was the creation of a set of dimensions of this change to some extent.
production
financial and trading arrangements The changes in occupational structure
designed to stabilize international trade were accompanied by similar changes in

and investment under American hege income distribution. The structure of
mony. Symbolized by the Bretton wages established by the new institutions

Woods agreement, the post-war financial of collective bargaining insured that blue
reestablished a stable system of collar wages increased in line with pro
regime
currency exchange and a mechanism for ductivity gains, especially in primary
balance of payments adjustment secured labour markets. The complex hierarchy of
by the dominant position of the American salaries introduced by the new principles
currency. This new regime opened the of management and the growth of white
way for increased international trade and collar occupations insured that the ranks
investment, based on the increased export of middle income earners began to swell.
of American goods to overseas markets, The changes in income distribution were
and the spread of United States-based also translated into changes in product
multinationals abroad. By the early demand, for mass produced
especially
1960s, these multinationals found them consumer durables, which also helped
selves competing with the transnational fuel the post-war boom.50
flow of European and Japanese capital, Many of the institutional changes in the
resulting in an even greater degree of inte post-war role of the state, especially the
and interpenetration of the universal of social programmes
gration provision
capitalist economies.49 such as health care, pensions and
The reconstitution of the family allowances, and the dramatic
post-war
social relations of facilitated expansion of the institutions of secondary
production
and higher reflected the chang
the fourth long wave of capitalist expan education,
sion. The transformation of the occupa concerns of the newly emer
ing political
tional class structure, initiated by the gent occupational groups in advanced
capitalist society. The growth of the pub
48 lic sector, the rise of a white-collar

This point is made by A. Negri, La class
salariat and managerial class and the
ouvriere contre V etat, quoted in Mouffe,
increase in educational and other
"Working-Class Hegemony," 16-7; a similar profes
is made in Accumulation sional all created new social
point by O'Connor occupations,
Crisis, 202-4; cf. also the discussion in strata whose interests were not
political
Lipietz, "The Globalization of the General necessarily with those of the
compatible
Crisis," 10-4. traditional industrial class. The
49 working
This account draws on my discussion in
50 and
"The Crisis in Advanced Capitalism;" cf. also Carlota Perez, "Structural Change
Giovanni Arrighi, "A Crisis of Hegemony," Assimilation of New Technologies in the Eco
in Amin et al., and Lipietz, "The Globaliza nomic and Social Systems," Futures, 15
tion of the General Crisis," 14-7. (1983), 366-70.
rise of these new

social strata, the expan view close
to Schumpeter's in questioning
sion of the
public sector, and the traditional Marxist concern
assumptions
institutionalization of working-class poli ing the leading role of the working class in
tics under the hegemony of social democ the process of socialist transformation.
ratic Keynesianism called into question The emergent social strata, or new
newly
the political role ascribed to the industrial social movements, have been as
suggested
working class inMarxist theory. potential substitutes for the traditional
One of the most astute students of role of the industrial class as rev
working
capitalism, Joseph Schumpeter, suggested olutionary subject. These suggestions
more than 40 years ago that the real threat have included state workers and state
to the future of capitalism might lie in its clients,51 a variety of new social move
successes rather than its failures. As was ments based materialist"
upon "post
noted above, was values (such as the peace, and
Schumpeter relatively ecology,
optimistic with respect to the purely eco women's or the non-class
movements)52
nomic prospects for capitalism. However, of post-industrial proletarians.53
he identified the supplanting of the classi Most of these risk sub
suggestions
cal role of the entrepreneur by the bureau a new form of teleology for the
stituting
cratized of the oligopolistic
functioning Marxist one they are so critical of. While
firm as the main danger to the survival of careful to differentiate their view from
threatening was the that of traditional these authors
capitalism. Equally Marxism,
rise of a new social stratum whose social fall into a similar that
trap by assuming
interests were fundamentally inimical to these new
groups represent potential
of ?
those capitalism the intellectuals. for the transition to socialism. In so
agents
He that the harnessing of sci
recognized doing, they fail to acknowledge that these
ence and technology to revolutionize the strata or movements new
may represent
labour process placed a strong premium social forces towards the
pushing
on the role of educational institutions. The of a new
emergence socio-political
value and reward systems of professional infrastructure, or mode of regulation,
educators were not next
strictly governed by which could fuel the long wave of
the capitalist ethos. He doubted the ability in much the same fashion that
expansion,
of capitalism to sustain fullemployment and resistance
working-class organization
among this emerging social stratum, driv the depression to
during years contributed
ing them towards an alliance with the the foundation of post-war democratic
labour to
movement promote social
capitalism.
policies conducive to their own interests. A critical assessment of the effect of
The outcome of this alliance would be the the current crisis on the reconstitution of
creation of a social that the social
atmosphere relations of production is neces
"explains why public policy grows more in order to assess
sary the prospects for
and more hostile to interests, a new
capitalist the emergence of such phase of
eventually so much so as to refuse on
prin capitalist expansion. The social relations
ciple to take account of the requirements of production associated with Fordism
of the capitalist engine and to become a to encounter own
began their barrier to
serious impediment to its function in the late 1960s and 1970s.
growth early
ing." (94)
51
While O'Connor, The Fiscal Crisis of the State,
Schumpeter clearly recognized
the potential of the changing chap. 9.
significance 52
Hirsch, "Fordist Security State," 85-6;
social context of capitalism, he exagger Claus Offe, "The Separation of Form and Con
ated the threat
posed by the newly emerg tent in Liberal Democratic Politics," Studies
ing social stratum. A growing number of in Political Economy, no. 3(1980), 12-5.
writers in recent decades 53
have espoused a Gorz, Farewell, chap. 6.
The decade of the 1960s witnessed the the early part of the century. The
intensification of increased pressure on rates of profitability
inter-imperialist rivalry
among the major powers. The in the industrialized economies in con
capitalist
existence of surplus capacity in key sec junction with the growing efforts of a
ondary manufacturing industries, com large number of

developing countries
bined with an increasing degree of inter induced the spread of Fordism to the
national competitiveness and falling levels periphery. The globalization of Fordism is
of productivity to put pressure on levels of directly attributable to the working of the
post-war regime of accumulation. Two
profitability.
The extensive of the prin decades of productivity-linked wage
application
ciples of Fordism the major increases in the industrial countries
throughout
branches of industry the key to created a differential
provided sufficiently large
the sustained increase in levels of output with wages in the developing countries to
and the overcome the cost of
productivity during post-war disadvantages
period. By the late 1960s, however, most relocating to the periphery. Multinational
of the reservoir of productivity that could capital is taking full advantage of the
be tapped through the application of these economies of scale created by the post
had been exhausted. war revolution in transportation and com
principles Capital's
efforts to sustain levels of surplus munications technology to tap the vast
high
value extraction the potential reserve army of labour in the
through progressive
scientization of the labour process developing countries. Peripheral Fordism
encountered resistance from is described asthe judicious combination
growing
workers' organizations. Greater of the traditional import substitution
tightness
in labour markets, with the expe model of industrialization with a newer
coupled
rience of two decades of rates of model of
export to substitution
take
steady
a wave of worker mili advantage of the opportunities to produce
growth, produced
tancy which manifested itself in the form with cheap labour from export free zones
of rising levels of absenteeism, contract for sale in the industrialized core.55
rejections, wildcat strikes, and industrial The spread of peripheral Fordism rep
most resents, at best, a limited solution to the
militancy, symbolized graphically
current crisis. The trend towards "dein
by the events of May-June 1968 in France
and the "hot autumn" of 1969 in Italy. dustrialization" in the
countries, core
in
The exhaustion of the possibilities of fur the context of the contractionary fiscal and
ther the post monetary policies of the past decade,
productivity gains through
war intensive of accumulation restricts consumer demand to the point
regime
downward pressure on where the increased production of the
imposed profit
rates, the onset of the current periphery cannot be absorbed. This raises
signalling
crisis.54 the prospect of prolonged stagnation for
Faced with the crisis of the countries of both the core and the
deepening
Fordism in the late 1970s and 1980s, periphery.56 Furthermore, the re
capi
tal in a variety of ways that importation of these productive activities
responded
threaten a restructuring of the labour pro
cess as radical as that which occurred in 33 Global
Alain Lipietz, "Towards Fordism,"
New Left Review, no. 132 (1982), 44-5; Folker
54
Lipietz, "The Globalization of the General Frobel, "The Current Development of the
Crisis," 21-2; evidence in support of this argu World-Economy: Reproduction of Labour and
ment is presented in Lipietz, "Derriere la Accumulation of Capital on a World Scale,"
crise," 215-27, and Samuel Bowles, David M. Review, 5(1982), 542.
and Thomas E. Weisskopf, 36 Choked
Gordon, Beyond AlainLipietz, "How Monetarism
the Waste Land: A Democratic Alternative to Third World Industrialization," New Left
Economic Decline (New York 1983), chap. 6. Review, no. 145 (1984), 71-87.
to the core countries an ongoing poor levelspay, of

and little security of
through
process of innovation can employment.59 Although these predictions
technological
not be ruled out, with the for may prove to be excessively pessimistic, it
prospect
even labour on a is clear that the current crisis will pro
greater displacement
scale.57 foundly alter the nature and role of the
global
The intensified to further industrial working class. The implications
pressure
reduce labour costs, raise of the current crisis for the recomposition
productivity
and restore rates has of the working class place even greater
levels, profitability
the incentive for capital to take obstacles in its path as revolutionary sub
provided
full of recent ject than have existed previously.
advantage technological
in microelectronics and These trends in both the international
developments
robotics. The common feature of these division of labour and the restructuring of
new is the increased the industrialized economies raise the pos
technologies degree
of control and flexibility that sibility of the emergence of a new mode of
they provide
over the work force and regulation as the outcome of the current
management
of the labour process. Taken crisis. However, Alain Lipietz suggests
every phase
the basis for the the emergence of such a mode of regula
together, they constitute
form of mechanization which may tion is dependent on the political resolu
tertiary
the basis for the expan tion of three related sets of problems: the
potentially provide
of the next long wave.58 immediate relations of production; the
sionary phase
The extensive of the new overall socio-economic relations; and a
application
forms of mechanization in a wide new international configuration. Two pos
tertiary
of industries will sible paths lie open for a post-Fordist reor
range manufacturing
further in the occupa ganization of the labour process. It may
produce changes
tional structure of the industrialized econ further enhance the disjuncture between
omies. As Gorz has the conception and implementation first
recently argued,
current transformation of the labour effected the practice of scientific man
pro by
cess is reducing the traditional industrial agement, or it may promote the rein
of the nineteenth to a tegration of mental and manual labour
proletariat century
small minority of the total population. leading to the opening of greater opportu
in the American context, Bob nities for workers to employ their collec
Writing
Kuttner has described the same tive intellectual capacities in the special
phenome
non in terms of "the middle." ized design of more precision engineered
declining
On the basis of evidence currently avail products.60
able, he argues that in The resolution of this first dilemma
job opportunities
the American are polarizing. raises the second critical issue of who will
economy
There will be concentration of benefit from the material gains wrought
increasing
jobs at the extremes of the occupational
structure with a certain proportion concen
59Gorz, Farewell, 69; Bob Kuttner, "The
trated in knowledge-intensive occupations
Declining Middle," Atlantic Monthly, (July
involved in the design and management of
1983), 60-2; cf. also Eileen Applebaum,
more automated forms of production. At "Winners and Losers in the High-Tech Work
the other extreme will be a large number place," Challenge, (September-October
of jobs in both manufacturing and the ser 1983), 52-5.
60 of the General
vice sector with low skill Lipietz, "The Globalization
requirements,
Crisis," 39-41. Robert Reich asserts that
changes in the latter direction are essential for

37 Over the Interna the future survival and adaptation of the pro
Rhys Jenkins, "Divisions
tional Division of Labour," Capital and ductive apparatus of the industrial economies,
Class,no. 22 (1984), 46. The Next American Frontier (Middlesex, Eng
38 681.
Coombs, "Long Waves," land and New York 1984), 127-39.
by the productivity increases of the new flexible form of national distributional
technological paradigm. It may result in policies, or, at worst, a pro

to facilitate
the mobilization of even larger masses of gressive delinking from the world econ
fixed capital than currently, with the bene omy of those nations which adopt the pro
fits directed to enhancing profits rather gressive path.62
than final demand consumption. Alterna The prospects outlined above are
tively, a new negotiated division of the merely suggestive of the possible paths
benefits of productivity gains may provide out of the current crisis. The challenge for
the mass of workers with access to new a Marxist theory of crisis is to critically
consumption goods and a dramatic assess the probability for a reconstitution
increase in consumption time, resulting of capitalist relations of production along
from a substantial decrease in necessary these lines that of a socialist trans
against
work-time.61 formation. The historical development of
The adoption of the more progressive capitalism has involved a complex process
solution to the distributional issue may of transforming the mode of production
pose major problems for the competitive on a social, political, and
technological,
ness of individual economies in the evolv basis. The process of change
geographic
ing international economy. Two alterna arises from the contradictions that inhere in
tive possibilities lie open. The competitive capitalist relations of production. Crises
struggle for international economic are the visible manifestation of those con
hegemony may assume a chronic "beggar tradictions; but rather than signalling the
thy neighbour" character, in which the conditions for the transformation of the
efforts of individual powers to sustain mode of production, they have historically
their own economies at the expense of provided the impetus for a reconstitution
others will produce prolonged stagnation. of the relations of production. A Marxist
Conversely, the recognition of mutual theory of crisis which wishes to retain its
interest may lead to the creation of new relevance as both
an analytical framework
international economic institutions to of capitalist society and a guide to politi
accommodate the introduction of the more cal action must seriously address this pos
sibility in the context of the current crisis.

61
Lipietz, "The Globalization of the General
Crisis," 41-2. The second alternative is
62
enthusiastically embraced by Gorz, Farewell, Lipietz, "The Globalization of the General
126-44. Crisis," 42-3.

Wolfe 1986

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Review: Capitalist Crisis and Marxist Theory

Author(s): David A. Wolfe

Capitalist Crisis and Marxist Theory

suggestion that the periodic occurrence of would be a heart-broken, a weakminded, a

project. Embedded in his analysis is the meaning of theconcept.3 In classical

well-being against the severe disruption of individual or society to itself

of Profit: A Dialectical View," Canadian Jour

develop an adequate of the

in the constant tendency of capital to in oligopolistic industries, due to the dif

competitive producers out of business, ence on Marxist theorists the

profit and the underconsumption lar aspects of underconsumption. In his

state in sustaining post-war expansion. Keynesian welfare state in sustaining the

Sweezy, he does not view unproductive advanced capitalist economies.15

military expenditures financed through

economy, (ix-xii) theory of crisis.

nantly cyclical phenomenon into a secular capitalism as a mode of production but

tendency.16 does not determine the exact moment of

Mattick's of Grossman does restoring the conditions conducive to a

lishing the lost proportionality between exacerbated the crisis tendencies of

III, at the expense of the equally Another counteracting influence with

interest rates. The overproduction of capi including the necessary outbreak of

laboring population, or low rates of profit, of exposition makes it difficult to do so.

expressed as falling real rates of tor: "any factor is

capitalist development suggests that a rate of accumulation; the development of

technological base. He maintains that ever, is a Russian, Nicolai Kondratiev.

theory conforms to existing empirical infrastructural projects, to be built in clus

expansive phase of the long wave occurs

sufficient to stimulate a new wave of a loss of the basic against

high level of organization, numerical Mandel's resurrection of the theory of

growth of inter-imperialist rivalry, the between the short-run theory of cyclical

expansion. quently, he is forced to resort to two ana

In spite of of lytically different principles to explain the

the critical role played consistency of his theory. Although one

He attributes the significant depressive to the expansive cycle of the

emergence of [the working class] as an

outcome over the other in the context of a

particular crisis. occasioned by shifts in the capital/

innovation offers an of the factors triggering a renewed period

Frank that the first manifested in the fall in the rate of

of the current wave of 1970s was characterized by falling levels

all the marks of a classic crisis. economy is the spreading rationalization

profit must be raised through a massive in the revolutionary transcendence of

America, and the other indus an excessive "economism." While all

contemporary Marxist theorists in his The extension of Marxist crisis theory

capital. The dynamic conflict between

Michel ously to become the numerically domin

regulation.44 The economic crisis of the increased in line with productivity in

43 " 1930s, partly through the institution of a

of new institutional roles for the state in diffusion of the processes of

productivity.48 number of manual workers required for a

designed to stabilize international trade were accompanied by similar changes in

mony. Symbolized by the Bretton wages established by the new institutions

capitalist society. The growth of the pub

48 lic sector, the rise of a white-collar

rise of these new

ondary manufacturing industries, com large number of

to the core countries an ongoing poor levelspay, of

changes in the latter direction are essential for

by the productivity increases of the new flexible form of national distributional

technological paradigm. It may result in policies, or, at worst, a pro

sibility in the context of the current crisis.

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