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The Problem: Marx Didnt Leave Us a Completed

Crisis Theory
These writings are built on the foundations of Capital, a work that at least in Germany is
becoming a bestseller once again. But Capital itself, though it lays the foundation, is not a
book about the periodic crises capitalist production goes through. Nor is there a section within
Capital dealing with such crises, as is generally the case with works that popularize the
theories of Capital.
Since Marx and Engels put so much emphasis on crises in the Communist Manifesto and other
works, this omission at first seems surprising. Marx had planned to crown his economic work
with a book on the world market, the state, competition and crises. As is well known, Marx did
not have the time to write this work. It is, of course, impossible for any other person to write the
work Marx might have written if he had had the time.
Evolution of capitalism
This isnt simply because only Marx was Marx. Since the time of Marx, capitalism has evolved
from industrial capitalism, based on free competition, to monopoly capitalism, passed through
the Great Depression of the 1930s, the so-called Keynesian revolution in government economic
polices, the end of the international gold standard and the stagflation of the 1970s, the
neoliberal reaction from the 1980s on, and now the new crisis. These events have provided a
huge amount of material for crisis theory that was unavailable to Marx.
Economic crises of varying intensities break out on the capitalist world market at quasi-regular
intervals, about every seven to 10 years. This pattern has been observed since the second
quarter of the 19th century. These crises have survived all attempts by capitalist governments to
stamp them out, though periods of violent crises have been succeeded by periods when crises
were more moderate for awhile, only to be followed by even more severe crises.
Mainstream capitalist economists dismiss crises, or recessions as they call them, as accidental
or at most secondary phenomena. In Marxist theory, however, crises play a far more important
role. To understand why this is, we have to understand another aspect of Marxism that is far
more basic than crisis theoryhistorical materialism.
Historical materialism holds that one form of human society does not give way to another until
the development of the forces of production that characterize a given epoch has come into

fundamental conflict with the existing social relations of production, or to use legal language,
property relations. Eventually, this renders the further development of human societyand of
economic production, which forms the foundation of every human society going back to the time
when our species first differentiated from the rest of the animal kingdomimpossible within the
framework of existing relationships of production.
There then begins a process of revolutionary transformation, which sooner or later brings not
only property relations but also the ideological life, and even the religious institutions, into
harmony with the new productive forces and the relationships of production or property forms
that the new productive forces dictate.
For example, in the Communist Manifesto, written between December 1847 and January 1848
in the wake of an early worldwide capitalist economic crisisthe crisis of 1847the young Marx
explained that the root cause of the end of feudal society, with its guilds and corporations, and
its replacement by capitalist society, based on free competition and free wage labor, was that
feudal society had come into conflict with the new productive forces. The further development of
these new forces of production demanded the abolition of the monopolistic restrictions of guild
production and feudal-serf agricultural relations.
Feudal social and economic relations had once been sufficient for the development of new
techniques in agriculture and craft production after the fall of the Roman Empire. This was true
despite the fact that feudal society, with its serfdom, hierarchy, orders and clericalism, strikes us
today as having been horribly unfree and unjust.
But toward the end of the Middle Ages, new methods of production were coming into conflict
with the prevailing feudal relations. There began an era of revolutionary transformation that over
a period of centuries banished the feudal world and gave birth to modern capitalist society with
its democracy, individual freedoms, equality of all before the law (at least in theory), separation
of church and state, free markets (free trade and free competition), and above all the labor
marketfree wage labor.
Up to a point, many bourgeois historians and economists are prepared to go along with Marx.
But they say that now that all feudal restrictions on the development of the economy have been
removed, no additional revolutions are needed. Future centuries will see the continued growth of
societys wealth on the basis of capitalist private property, competition and wage labor. But there
will be no further qualitative transformations. After several hundreds of thousands of yearsif
we count from the emergence of biologically modern humanshuman society has reached its
final form. Thus, they hold, history as reached its end.

Present-day neoliberalism wages a struggle against all concessions that the working class over
the last 200 years has wrung from the capitalist ruling class. Neoliberals claim that these
restrictions on business must be removed so that the rate of economic growth can be
accelerated. They claim to be continuing the progressive struggle that the original liberals waged
several centuries ago against lingering feudal restrictions. They hold that their struggle against
the gains won by the working class will lead to full employment and a new rise in the standard of
living for all, including the working class.
The most extreme manifestation of neoliberalism was the dismantling of the planned economies
of the Soviet Union and Eastern Europe by the anti-communist governments that rose to power
in those countries in the 1980s and 1990s. The leaders of these new governments, many of
them intellectuals with strong neoliberal views, claimed that by removing the restrictions that
the planned economies placed on industry and agriculture, the resulting economic upswing
would lead to a great rise in the standard of living of the entire population, the working class
Instead, industrial and agricultural production plunged, and except for the members of the new
capitalist class and a few hangers on, the standard of living has greatly declined. Much of the
population faces truly dire poverty, and whole regions have seen a collapse of modern
Marx versus liberals
In contrast to the economic liberals, Marx held that it was precisely free capitalist relations
that is, capital itselfthat was and is the new barrier to the development of production and of
human society. Therefore, according to the theory of historical materialism, capitalism cannot be
the final form of society. It is enough to mention the commercial crises, Marx wrote in the
Manifesto, that by their periodical return put the existence of the entire bourgeois society on
trial, each time more threateningly. In these crises, there breaks out an epidemic that, in all
earlier epochs, would have seemed an absurditythe epidemic of over-production.
It is not necessarily true that capitalism will be overthrown during a commercial crisisto use
the original name for cyclical capitalist crisesworse than any other, as the early socialist
movement held a century agothough this is, of course, a possibility. Rather, the economic
contradictions that come to a head during capitalist crises prove that capitalist production is
simply a phase in the history of production that must sooner or later be replaced by a higher
mode of production.

An amazing man
Frederick Engels, who co-authored the Communist Manifesto, was an amazing man. He was a
19th-century businessman, Karl Marxs closest friend and collaborator, and an uncompromising
advocate of a world working-class revolution. Engels combined a profound theoretical knowledge
of political economy with the practical experience of a businessman who had helped steer the
textile firm of Engels and Erman through booms and crises that wracked the mid-19th-century
world textile market. This is a resum few can match.
In 1877, Engels wrote a polemical work known as Anti-Duhring against the now-forgotten
German professor Eugene Duhring, who was then gathering influence in the early German
Socialist Workers Party, forerunner of the German Social Democratic Party. Here, Engels gives a
classic description of capitalist economic crises.
At the time Anti-Duhring was written, Karl Marx was still very much alive, even if his ability to
work was greatly reduced by ill health. By 1877, Marxs great economic discoveries were behind
him. If the mature Marx had disagreed with his friends work, he would surely have let it be
known. Instead, he contributed a chapter to it. Therefore, we can be confident that the following
quote from Anti-Duhring reflects the views not only of Engels but of the mature Marx as well
on the subject of cyclical crises.
We have seen, Engels wrote in Anti-Duhring, that the ever-increasing perfectibility of
modern machinery is, by the anarchy of social production, turned into a compulsory law that
forces the individual industrial capitalist always to improve his machinery, always to increase its
productive force. The bare possibility of extending the field of production is transformed for him
into a similarly compulsory law. The enormous expansive force of modern industry, compared
with which that of gases is mere childs play, appears to us now as a necessity for expansion,
both qualitative and quantitative, that laughs at all resistance. Such resistance is offered by
consumption, by sales, by the markets for the products of modern industry. But the capacity for
extension, extensive and intensive, of the markets is primarily governed by quite different laws
that work much less energetically. The extension of the markets cannot keep pace with the
extension of production. The collision becomes inevitable, and as this cannot produce any real
solution so long as it does not break in pieces the capitalist mode of production, the collisions
become periodic. Capitalist production has begotten another vicious circle.
Here, Engels sees crises as collisions between two counter-posed forcesthe physical ability that
modern science and technology gives the industrial capitalists to expand production seemingly
without limit, and the need of the same industrial capitalists to do just that due to the pressure
of the mutual competition among themselves, on one side, and on the other, the quite different

laws that govern the growth of markets. These laws dictate that markets, though they too grow
both intensively and extensively, expand at a rate much slower than the ability and need of the
industrial capitalists to expand production.
Since under capitalism production cannot in the long run grow faster than the market, this
contradiction is periodically resolved through a massive contraction of production, destruction of
existing productive forces, and massive unemployment such as we are at present once again
witnessing. This resolution is only temporary. After the crisis, and after sometimes years of
stagnation, production enters a new powerful expansion that leads once again to a new flooding
of the marketa new crisis.
As these crises and their side effectssuch as world wars, for examplebecome increasingly
destructive, the replacement of capitalism with socialism becomes urgent and eventually must
take place if modern society is to survive. In Anti-Duhringthis material can also be found in
Socialism, Utopian and Scientific, a part of Anti-Duhring that has been published as a
standalone pamphletEngels gives a masterly description of the basic contradictions of capitalist
production, the contradiction between the growing socialization of production versus the
continuation of individual appropriation of the product, the overall anarchy of production versus
its increasingly centralized, socialized and globalized character, and the deepening conflict
between an ever more wealthy capitalist class and the growing, increasingly exploited working
Laws governing growth of market not spelled out
But Engels does not actually formulate the laws that govern the growth and expansion of the
market. While his readers have no doubt that he considers the basic contradictions of capitalism
to be behind the inability of the market to grow as fast as production, Engels does not actually
explain why this is and indeed must be so.
Why does the conflict between the private appropriation of wealth and the socialized nature of
production; the growing anarchy of production versus the increasingly planned nature of
production within the capitalist enterprise, and later the giant transnational capitalist
corporations; and the growing antagonism between the capitalist ruling class and the working
class lead by necessity to a situation where the growth of the market cannot keep up with the
growth of production?
One hundred and thirty-one years have passed since Engels wrote Anti-Duhring. It might be
thought that this question would be well understood by now. Yet Marxists give the most diverse,
and sometimes completely contradictory, explanations of why this is so. Indeed, manyperhaps

today mostMarxists largely disagree with Engels and Marx as well, and deny that industrial
overproduction is the essence of the cyclical economic crises that mark the concrete history of
capitalism from 1825 onwards.
I will examine the crisis theories that have been proposed by various schools of Marxists, and
make some suggestions based on many decades of thought and research on how this puzzle can
finally be resolved. Along the way, I will examine the attempts of capitalist governments to
counteract crises and their results, and the relationship between crises, imperialism, militarism
and war.
Marxs method and his theory of crises
Why did not Marx himself leave us a complete theory of crises? I think the answer can be found
in Marxs method. Originally, Capital was to be only a part of a much more ambitious project
entitled A Critique of [Bourgeois] Political Economy. In addition to the book on capital, Marx,
according to his letter to Engels dated April 12, 1858, planned to write books on landed property,
wage labor, the state, international trade and the world market. It was probably to be the last
book, the book on the world market, that would have contained the theory of crises.
The theory of crises would have crowned the entire critique of political economy, since it is
during crises that all the contradictions of capitalist production, many of them normally hidden,
rise to the surface. Due to his declining health, it eventually became clear to Marx that he would
almost certainly not be able to complete his project. Capital (all three volumes plus Theories
of Surplus Value) was to be only one of six books according to the plan of 1858. It seems that
Marx also worked into Volume III of Capital elements of what had, according to the original
plan, been the book on landed property. Marx was not able to incorporate a complete rounded
theory of crises into any part of Capital. The full theory of crises simply does not belong in
Why not? Again, its a matter of method. Marx always began at the abstract level, only gradually
working towards the concrete. Just like crises in practice are the crown of capitalisms basic
contradictions, the theory of crises would crown the Critique of Political Economy. Therefore,
the theory of crises would, according to Marxs method, have to come last.
Marxs mature economic works that were published in the authors own lifetimethat is, the
works written after Marx had worked out, at least in his head, his most important contributions
to economicsconsist of exactly two books: A Contribution to the Critique of Political Economy
(1859) and Volume I of Capital (1867).

Other books by Marx, The Poverty of Philosophy and Wage Labor and Capital, belong to
Marxs early period, before he had worked out his theory of labor power and surplus value and
many other important economic discoveries. Value, Price, and Profit, which can be considered
as part of Marxs mature work, was published after the authors death as a pamphlet or small
book. It was actually a part of a debate in which Marx defended trade unions at a meeting of the
International Workingmens Association (First International) that was held in London around the
time of the publication of the first volume of Capital, in German.
Other economic works of Marx were not published in his lifetime. The Grundrisse, generally
considered the earliest of Marxs mature economic work, is a series of notebooks that Marx
wrote up in the winter of 1857-58, when his interest in economics was stimulated by the
worldwide economic crisis of those years. It was published first in Moscow in 1939-41, and a
later English version was brought out in 1973 by Martin Nicolaus. In 2008, a new version was
published by Routledge, edited by Marcello Musto. The Grundrisse is a rich mine, but it is a
series of notebooks by the author, not a work meant for publication in that form. Many ideas
were just being worked out for Marxs own self-clarification.
Volume I of Capital (the only part finished by Marx himself) deals with capitalist production. It
explains how surplus value arises on the basis of the production of commodities that are
exchanged at their valuesthat is, on the basis of an hour of embodied labor for one hour of
embodied labor. Volume II of Capital deals with the circulation of capital and the problem of
reproduction. The subject matter of volume III was to be capitalist production as a wholethat
is, the unity of capitalist production and circulation.
Volume III introduces such crucial concepts as the equalization of the rate of profit and the
transformation of values into prices of production, and the famous law of the tendency of the
rate of profit to fall. Volume III also contains a section on landed property and differential and
absolute ground rent, which perhaps was originally intended for the book on landed property
that Marx never wrote. Volume III contains many scattered observations on credit, the money
market, banking, currency, interest rates and, yes, crises. Volume III is also enriched by
footnotes by Engels, many dealing with the concrete crises of the 19th century, based partially
on Engels personal experiences as a Manchester businessman.
But volumes II and III are also a series of notebooks put together by Engels. They retain a
rough, unfinished character. This is especially true of volume III. Theories of Surplus Value, a
part of what was to be a history of economic thought, was put together from Marxs notebooks
by Karl Kautsky after Engels death. Later, after World War II, the Institute of Marxism-Leninism
of the Central Committee of the Communist Party of the Soviet Union put out a different version.
Their version contains an introduction that is very critical of Kautskys work.

Of the two economics books that belong to Marxs mature period that were actually finished by
Marx, the Contribution to a Critique of Political Economy of 1859 deals with the nature of the
commodity, money and exchange rates. It is mostly known for its famous introduction; the book
itself is little read. Much of its subject matterthough not allwas repeated in much improved
form, according to Marx, in the first three, and most abstract, chapters of Capital, volume I.
The book that was to deal with crises, the book on the world market, was, as already mentioned,
never written. Perhaps elements of it were included in Capital, volume III, parts of which were
written not long before Marxs death when he was becoming aware that he wasnt going to be
able to complete the original plan of his work.
Marx made some interesting observations on crises in a letter to N.F. Danielson (a Russian
Populist writer) dated April 10, 1879, in which he gives a fascinating analysis of the crisis that
was then hitting England. He even says that he didnt want to publish the next volume of his
book before the crisis had worked itself out.
Even at this very late stage in his life, Marx was still learning from the actual evolution of the
world capitalist economy and its actual concrete crises. To the end, he was as much a student as
he was a teacher. In the years after Marxs death in 1883 until his own in 1895, Engels in letters
to various correspondents has much to say about crises and the concrete development of the
world capitalist economy in those years. These letters deserve careful study.
Attempts to further develop Marxist crisis theory inadequate
Since the death of Engels, many Marxists have attempted to develop Marxist crisis theory. They
tend to be based on quotes from Marxs works, published and unpublished (in Marxs lifetime).
In these essays, I will begin with an examination of these proposed solutions to the puzzle of
capitalist crises. I will examine various of the most popular crisis theories put forward by various
Marxist writers since the death of Engels. This examination makes no claim to be exhaustive, but
it covers the most common crisis theories. All these theories are, in my opinion, interesting and
contain elements of the truth but are inadequate by themselves.
I will post essays that examine questions of currency, exchange rates, credit, interest rates,
banking, world trade, competition and the world market. These postings and any book or books
that come out of the main manuscript these essays are based on wont, of course, be the
exhaustive work that Marx planned to write. But they will say what has to be said to support a
correct theory of world market-wide periodic economic crises of capitalism. No crisis theory can
in my view be correct that does not include a careful examination of these subjects.

I will also post an essay on the so-called Law of Comparative Advantage, which preaches to the
oppressed countries that they should abolish their protective tariffs and open their markets to
free trade. This idea is central to the arguments of the neoliberal economists. Anybody who has
had the misfortune to take a college-level economics course has been exposed to this so-called
law, though most people no doubt have long forgotten it, along with much else they learned in
college courses.
I will trace this idea back to its Ricardian origins and show its dependency on the quantity theory
of money and Says Law. This has great contemporary interest in light of the rise of governments
in Latin America that are increasingly resisting the call for free trade. This resistance has, at
least for now, largely taken off the agenda the Free Trade Area of the Americas, proposed by the
government of the United States, which would transform the hemisphere into one gigantic freetrade area.
Another group of essays will build up a theory of crises based on the concrete conditions of
credit and competition found on the world market but rooted in the basic laws of motion of
capitalism that were worked out by the classical political economists and, later, Karl Marx.
Other essays will deal with the concrete history of capitalism and a question closely related to
crisis theorythe controversial view accepted by some Marxists and strongly rejected by others
that in addition to short-term business cycles of some seven to 11 years the capitalist economy
shows a series of much longer cycles or waves that extend over several or more business
cycles. In these postings, I will examine the period from the mid-19th century up to the
outbreak of the current crisis to see what concrete evidence there is for the existence or absence
of long waves.
Finally, I will take a look at the breakdown theory, which is closely related to crisis theory. This
began as a debate between Rosa Luxemburg and the other leaders of the old German Social
Democratic Party that grew out of the initial struggle against Edward Bernsteins original
revisionism. The debate was later continued by Henryk Grossman and Paul Mattick in the years
after the Russian Revolution.
Between them, Luxemburg on one side and Grossman and Mattick on the other put forward two
contradictory breakdown theories. The supporters of the breakdown theory, whether
Luxemburgs version or the Grossman-Mattick version, hold that capitalist production has a builtin limit beyond which it cannot go. Though formally apart from crisis theory, which deals with
the periodic crises of capitalism, it is in fact in both Luxemburgs and Grossmans versions closely
connected with each authors crisis theory.

Current crisis vindicates Marx

The current crisis has pretty much proven that Marx was correct when he explained that periodic
cyclical crises are endemic to capitalism and will never be eliminated while this mode of
production exists. As this is being written, the so-called G-20 countries have met in Washington
to reform the world financial system to guarantee that a global crisis such as the current one will
not recur. We have heard this many times before. If Marx was rightand I am more convinced
than ever that he wasthese new attempts to find ways to prevent global capitalist crises,
assuming they are not simply political demagoguery designed to buy time for various
governments, will fail in the future just as they have always failed in the pastassuming, of
course, that capitalism continues to exist.
There have been in the past, and may well be in the futurethough this is by no means certain
periods, such as the recently ended Great Moderation, when crises become less severe for
awhile for reasons we will be examining in these essays. What is certain is that the
contradictions of capitalist production will keep on being reproduced in ever more extreme forms
as long as capitalist production continues. Sooner or later, they will break through all the
measures that capitalist governments and central banks erect to contain them.
Indeed, as crises have become an ever greater threat to capitalist society, the state has been
forced to take ever stronger and moreexpensive financial measures in order to hold the more
destructive consequences in check to a certain extent. The result has been that, as time goes
on, crises increasingly involve the finances of the state itself. There have even been a few hints
in the capitalist media that the bankruptcy of the federal government of the United States might
be a possibility. To a much greater extent than was true of the early crises in the days of Marx,
or even as late as the 1920s, the modern cyclical crises of capitalism become political crises.
This trend was in full display for all to see in the fall of 2008.
But the biggest question the current crisis raises is this: If Marx was right about crises, as even
the bourgeois press is being forced to half concede, doesnt that imply that he was right about
the inevitable transformation of the capitalist mode of production into a higher mode of
productionwhat Marx sometimes called the mode production of the associated producers? The
necessity for society to take over the management of the means of production is now so
pronounced that even the neoliberal Bush administration found itself forced to partially
nationalize the banking system, which in its current form as a system dominated by a handful of
gigantic universal banks is bound to increasingly dominate industry and indeed capitalist society
as a whole.

Needless to say, this doesnt mean that Bush, or Obama for that matter, are carrying out the
socialist revolution! But just as Engels already in his lifetime explained, the fact that the
capitalist governments are forced to intervene increasingly in the sphere of production, while
resisting it at every step, indicates that the task of socializing the means of production must be
carried out sooner or laterincreasingly soonerif modern society is not to go to pieces and be
reduced to barbarism.
And what about the agent of this takeover by society of the management of the means of
production? Marx said it would have to be the working class, the class that actually sets the
means of production into motion and produces the surplus value that is the basis of profit, the
sole motive of capitalist production. Could Marx have been right about that despite the low ebb
of the workers movement in recent decades? What other conclusion can be drawn?
Aim of this blog
So the real aim of these essays and this blog is to help provide weapons to the young generation
of workers and revolutionary intellectuals to move this process along. After mastering the results
of incomplete revolutions of the last century, revolutions that stopped half way and were then
driven back, though not all the way back, to their starting points, a new movement of workers
ready to storm heaven must be launched like that of the immortal Paris Commune of 1871 and
then the Russian Revolution of October 1917 and the October wave of revolutions that
This time, the storming of heaven must not stop half way. It must not stop until all of heavens
positions are captured and secured. There is really no other choice. I hope these essays will
make a modest contribution to the preparatory work by helping educate the coming
revolutionary generation about the real nature of capitalist production and the need to transform
this system of production into the system of the associated producers, a communist society
where class rule is forever abolished.