With the present state of the world, it is timely to look at the concept of “crisis”, a most frequently used term nowadays. For Marxists, “crisis” has multiple connotations.
There is the general crisis of capitalism, referring to our present historical period, in which capitalism as a social system loses its global monopoly. Another social system, socialism, based on the power of the working people, makes its appearance. Some socialist countries are no more, but the exploitation, brutality and poverty suffered by masses of people at the hands of capitalism, especially in South America, is seeing ever more countries extricate themselves from the imperialist web. Socialist revolution is on the historical agenda.
A second use of the term “crisis”, which actually pre-dates the first use, is in “crisis of overproduction”, which is one of the four phases of the cycle of crisis, recession, recovery and boom, which is characteristic of and intrinsic to the process of capitalist production. Crises of overproduction have been regular features of capitalist economies since the early 1800s.
Capitalist production is unplanned, anarchic, with each enterprise aiming to make maximum profits. Capital must keep “turning over”, with goods continually sold, so the profits of exploitation, surplus value, are constantly turned into money, ready for a new round of production and exploitation.
If this turnover is interrupted, a crisis of overproduction can occur. The turnover of capital can be impeded if there is an imbalance between the two major branches of industry — capital goods and consumer goods — or if the level of demand in the economy as a whole is insufficient, relative to productive capacity, or if there are long-term trends at work, altering the structure of capitalist economies and intensifying the social contradictions within the system e.g. downgrading of manufacturing in advanced capitalist countries.
Crises of overproduction (recessions, depressions) are inevitable under capitalism and ultimately stem from the fundamental contradiction in capitalist society, that between the social character of production and the private appropriation of the product, which occurs because of the private ownership of the major means of production.
The capitalist world has been heading towards recession for some time but there is more to capitalism’s current economic troubles. We cannot simply reduce the present economic state to just another crisis of overproduction.
Capitalism is in a financial crisis. It also suffers an environmental crisis, food crisis, housing crisis, a crisis of public health and other secondary crises. The financial crisis is the result of wholesale deregulation of capitalist economies (a response to the demands of transnational corporations to “leave it to the markets”) allowing the enormous growth in speculation over the last two decades. The current round of the financial crisis was triggered by predatory and fraudulent lending practices associated with sub-prime mortgages in the US housing market.
As the recent CPA Central Committee Executive resolution says:
In this era of accelerated globalisation, massive amounts of capital, trillions of dollars, are moved every day between electronically connected markets, seeking profits. Speculation is rife. In fact, a main tendency of today’s capitalism is to bypass the productive economy, the real production process which generates all wealth, and to make huge amounts of fast money through speculation.
It also says:
The consequences of the sub-prime mortgage scandal are bringing hardships for many working people around the world. It is typical of capitalism that billions of dollars of taxpayers’ money has been used to bail out the banks. Privatise the profits and socialise the losses is still capitalism’s guiding light. Not one person has been saved from foreclosure and eviction by bailouts, not one pension fund or superannuation scheme has been quarantined from the devastating effects of the crisis.
In this way, the financial crisis is interwoven with and exacerbates the crisis of overproduction. It is another main factor pushing capitalist economies towards recession.
Capitalism doesn’t collapse because it’s in an economic crisis or in a period of general crisis. That is a common misconception. In fact, crisis has been called “a form of motion of capitalism”. It is a normal pattern for capitalist development. A crisis of overproduction is a period of renewal, especially for the stronger enterprises which buy up or replace the weaker ones and renew their means of production at a more technologically advance level.
It may be a time of crisis and hardship, but it’s also an opportunity to discuss with people the workings of capitalism, its instability, its exploitative nature, its rapacious greed, fuelled by deregulation and the gargantuan growth in speculation.
It is a time to publicise the advantages of socialism, for example in China and in Cuba. It is a time to inform people about and win their support for the progressive changes taking place in Venezuela and other South American countries and to demonstrate how their move away from the private enterprise system and towards socialism, is deepening the general crisis of capitalism.