Why is capitalism cyclical

For Marx, it is a nightmare. The law of population, for Uno, explains the necessity of crisis. With the development of the productive forces and the rise of the organic composition of capital, Uno contends, we do not merely confront a growing relative surplus population, but also a relative surplus of capital :.

Of course, because a higher organic composition of capital forms a relative surplus population against capital, capital does not always need to directly improve its forthcoming production methods. Especially, in this context, the concept of the value of labour power is reconsidered by Uno, as a dependent variable considerably modified by the law of population itself. Towards the end of this chapter 2. In the Methodology , Uno quotes from the —5 Economic Manuscripts:.

Uno strongly emphasises this small passage, and it occurs repeatedly over his theoretical writings. Here, in the context of the three levels, Uno gives only a brief sketch of the importance he ascribes to the law of population for pure theory. This is precisely the point on which capitalism historically forms itself into a determinate form of society, and further, is what makes it independent in pure-economic terms.

Like land, it is a so-called given for capitalism, one that is given from its exterior, but unlike land it can be reproduced, and by means of this reproduction becomes capable of responding to the demands of capital put forward through the specific phenomenon of capitalism called crisis.

The law of population, for Uno, generates stages of development of capitalism by the extended reproduction of the labour power commodity. Uno also contrasts this with the narrative of primitive or original accumulation: once the labour power commodity has been established and can be reproduced by its own means, it is able to determine the development of capitalism, as well as the speed of higher development of the productive forces by itself: The stages of development of capitalism are themselves determined through the mechanism of the extended reproduction process of labour power as a commodity.

Capitalism in its beginning has, in its necessity for labour power for its own development, in contrast with consolidating and going through the so-called accumulation process of capital, gone through the circulation of cyclical economic boom in its developmental phase. This is guaranteed by the higher development of the consolidation of capital and the formation of a relative surplus population.

As a deliverer of labour power, capitalism itself becomes autonomous. However, with increasing speed, higher development accompanies the growth of productive forces and at all times allocates the additionally necessary surplus population by itself.

We will return to this point soon. As we have seen, the problem of the method in Capital , as Uno sees it, is that Marx conflates the levels of the presentation of pure theory with historical contingencies so that they do not stand to the requirements of the principles of pure capitalist society.

The greater the social wealth, the functioning capital, the extent and energy of its growth, and therefore also the greater the absolute mass of the proletariat and the productivity of its labour, the greater is the industrial reserve army. The same causes which develop the expansive power of capital, also develop the labour power at its disposal.

The relative mass of the industrial reserve army thus increases with the potential energy of wealth. But the greater this reserve army in proportion to the active labour-army, the greater is the mass of a consolidated surplus population, whose misery is in reverse ratio to the amount of torture it has to undergo in the form of labour.

The more extensive, finally, the pauperized sections of the working class and the industrial reserve army, the greater is official pauperism. This is the absolute general law of capitalist accumulation. Like all other laws, it is modified in its working by many circumstances, the analysis of which does not concern us here. Quite to the contrary: the law of population can of its own accord determine the extent of capitalist accumulation via extended reproduction at a certain level of capitalist development.

From these statistics alone it is clear that the industries of the second industrial revolution had not absorbed anything like as much labour as those of the first in the moment of their initial appearance. In chapter 25 Marx provides additional statistical evidence that, from to , employment continued to grow substantially only in those older industries in which machinery had not yet been successfully introduced.

Grasping this contradictory secular development of the production of a permanent relative surplus population on the one hand and higher shares in profitability concentration and centralisation of capital , i. The crisis of valorisation is conditioned by its own contradictory incentive of minimising labour inputs, while holding fast to abstract labour as the only source of value.

We will return to this in more detail in our conclusion at the end of the section. Its constitution is based on its inexhaustability, i. Because capital cannot invert its level of the development of the productive forces, it cannot invert its repulsion of labour. Hence, the establishment of a permanent industrial reserve army is an irreversible tendency inherently constituting the contradiction in the law of valorisation.

In other words, the working class produces its own conditions of possibility as the conditions of its impossibility. It therefore reproduces its own abolition as the working class and, hence, its conditions as paupers, as surplus proletariat, or in short, as the proletariat. Finally, the law which always holds the relative surplus population or industrial reserve army in equilibrium with the extent and energy of accumulation rivets the worker to capital more firmly than the wedges of Hephaestus held Prometheus to the rock.

It makes an accumulation of misery a necessary condition, corresponding to the accumulation of wealth. Accumulation of wealth at one pole is, therefore, at the same time accumulation of misery, the torment of labour, slavery, ignorance, brutalization and moral degradation at the opposite pole, i. Indeed, one cannot understand the formation of the surplus proletariat in abstraction from the wage form.

It might seem that the abundance of goods, which results from labour-saving innovations, must lead to an abundance of jobs. But in a society based on wage-labour, the reduction of socially necessary labour-time — which makes goods so abundant — can only express itself in a scarcity of jobs, in a multiplication of forms of precarious employment. Michael Heinrich in this context thematises the intensity vs. Against the traditional understanding of immiseration theory Verelendungstheorie of an either absolute or relative immiseration of the working class in terms of intensity — i.

This latter point will now receive greater attention. Because, for Uno, the capitalist re production process hinges on the fact that the commodification of labour power as the consumption process of workers cannot be performed by capital itself, labour power shortage presents an impediment to valorisation , leading to crisis.

For Uno, this is the more general framework to the law of population. It is located in the direct contradiction of the laws of the creation of surplus value with the laws of its realisation. For Marx, they are on the one hand determined by natural circumstances, and on the other formed by historical ones. But I think that these historically formed circumstances are determined by the law of population. But according to Uno, Marx has never successfully managed to determine this very level , or indeed, the nature of the modifications of the wage level itself.

For Marx,. On the other hand, the number and extent of his so-called necessary requirements, as also the manner in which they are satisfied, are themselves products of history, and depend therefore to a great extent on the level of civilisation attained by a country; in particular they depend on the conditions in which, and consequently on the habits and expectations with which, the class of free workers has been formed.

In contrast, therefore, with the case of other commodities, the determination of the value of labour-power contains a historical and moral element. Capital is something that cannot directly produce the labour power commodity, but through the formation of a relative surplus population in its accumulation process, it can indirectly produce it, so to speak.

This is the development of what Marx called the law of population specific to capitalism. To understand and subsequently comment on this, let us briefly recapitulate the previous. With the relative surplus of capital against labour power,. Because just as the accumulation of capital progresses, the surplus value earned as profit diminishes, and this is the fundamental element of the specific phenomenon of the capitalist commodity economy known as crisis.

It is usually thought that crises occur because capital has produced too many commodities it is unable to sell. But even though such things may occur, in the anarchistic production that is the production of capital, still the price of abundantly produced commodities falls, whereas the price of commodities not sufficiently produced, rises.

In between the two, capitalist production is socially regulated through the movement of price, so that at this point, it is regulated by the law of value.

The wage, in other words, presents the independent variable for Uno. Both the commodification of labour power and the de-skilling of labour, forming the internal basis to the law of population specific to capitalism that is the formation of an industrial reserve army, at last does not suffice for one social system.

The basis of this passing through is given to a certain degree. From here, Uno develops a general theory of business cycles directly from the relation between the fact that labour power is not produced by capital and the formation of a relative surplus population:. Here the necessity of crisis can be proven for the first time.

The relation between workers and capitalists determined within the industrial cycles of boom, depression, and recession, in other words, within the movement of the wage, now also clarifies the historical element of the determination of the wage itself. The value of the labour power commodity, even if reduced to one fixed amount of the value of the means of subsistence, is quantitatively and qualitatively determined by changes within the process of the industrial cycle.

As such, for the first time, as Marx has said, the average circumference of the necessary means of production is determined. To the contrary: it may have had some relevance for s—40s England, but it could not provide a general scheme of the actual significance of the law of population, in that it explains the origin, occurrence, and repetitive schema of the business cycle.

If the quantity of unpaid labour supplied by the working class and accumulated by the capitalist class increases so rapidly that its transformation into capital requires an extraordinary addition of paid labour, then wages rise and, all other circumstances remaining equal, the unpaid labour diminishes in proportion.

But as soon as this diminution touches the point at which the surplus labour that nourishes capital is no longer supplied in normal quantity, a reaction sets in; a smaller part of revenue is capitalized, accumulation slows down, and the rising movement of wages comes up against an obstacle. The rise of wages is therefore confined within limits that not only leave intact the foundations of the capitalist system, but also secure its reproduction on an increasing scale. First, the price of labour keeps on rising, but the progress of accumulation is intact.

Marx contends that neither of the two scenarios implies changes in the availability of labour-power or the working population:. We see therefore that in the first case it was not the diminished rate, either of the absolute or of the proportional increase in labour-power, or the working population, which caused the excess quantity of capital, but rather the converse; the increase in capital made the exploitable labour-power insufficient.

In the second case, it was not the increased rate, either of the absolute or the proportional increase in labour-power, or the working population, that made the capital insufficient, but rather the converse; the relative reduction in the amount of capital caused the exploitable labour-power, or rather its price, to be in excess. This notably happens in the intra-sectoral competition forcing down the market price of productive capital under its real value, forcing new productive methods that further accelerate the downward spiral.

For capital, everything stands and falls with the question of not how much labour-power capital can absorb in terms of the absolute working population, but how much unpaid labour it can absorb in the immediate process of production. We term this a use value fetishism emerging from the conditions of capitalist mediation itself.

This rough sketch of our argument will now be addressed in more detail. In the light of the previous, this seems like a strange proposition indeed. Not only has Marx at no point made this argument, but to the contrary: for Marx, this commodification is not only not impossible, but the basis to the actual modus operandi of capital.

From where, then, does Uno draw the alleged importance of the conditions of the reproduction of labour power as a theoretical problem for Marx? For Uno, as we will see, it presents an omission of the interrelatedness of the two. In Chapter 2. However, for an autonomous economy commodity to be established as a historical society,. It is only with such a kind of society that all the previous social relations have been eliminated.

Uno conceptualises the purchase of labour power as a commodity as the key feature of the capitalist production process: The production process of capital is not merely the purchase of the so-called means of production that are raw materials, instruments, machinery etc.

The substantial requirement for the appropriation and accumulation of surplus value — to which Uno mysteriously does not refer to in these passages — is not production as such, neither its vicissitudes, nor its continuing process of optimising the extraction and appropriation of living labour, but the acquisition of necessaries food etc. This point has certainly been neglected in political economy before.

By virtue of this point, the commodification of labour power is the commodification of something that originally should not have been commodified. Capitalism thereby becomes a strange thing that integrates the totality of the production process into commodity relations.

Labour power turns into a commodity, but even so it is not a product of capital. Generally, it is not a product seisanbutsu produced by the production process. Rather, by the consumption process of things mono we reproduce in our own human lives.

Of course, as with other products and the means of production and labour power produced by the consumption process, Marx was right to say that production is also immediately consumption. However, I think that the difference between the production and the consumption of things must as a matter of course be considered in contrast to the consumption and the production of labour power. For Marx, consumption in the private lives of workers is subsumed to the form determination of the production process.

Hence, even the form of consumption is ultimately determined by the form of production. They cannot consume more than they earn in the form of the monetary wage, which presents only a fraction of the productive capital at the initial production cycle.

Though this is not the place to discuss the question of the origin of surplus we will return to it in Chapter 4. Long before any form of organised production, in periods of conquest and pillage, production subordinated consumption or distribution and thus goes back as far as human societies existed:.

It is a received opinion althergebrachte Vorstellung that in certain periods people lived from pillage alone. But, for pillage to be possible, there must be something to be pillaged, hence production. And the mode of pillage it itself in turn determined by the mode of production. A stock-jobbing nation, for example, cannot be pillaged in the same manner as a nation of cow-herds. In the following, we will show why this view is mistaken. That what the labourer himself once used is no longer useful to him and has instead turned into a commodity, is the ultimate standpoint from which the development of the commodity society has to be grasped.

But on what grounds does Walker insist that the initial C is not produced as a commodity? Unlike any other commodity, the value of the means of subsistence that the labourer consumes is not at all converted into and retained as valorized in the form of labor power as a commodity as it appears in the production process. On this, we hear little from either Uno or Walker. What is decisive however is that the means of subsistence the workers consume are primarily produced as values : as a particular product share in a national economy which Marx in Volume II of Capital calls Department II , the Means of Consumption, that is exchanged for money , and therefore presents an irreducible share in the rate of profit for the capitalists of Department II.

In other words, it is crucial to this discussion that capitalist mediation is a monetary one: the means of subsistence or consumption, like that of production, are monetarily mediated, i. The latter however is only appropriated through money, and it is money alone that at once quantifies the means of subsistence needed for the production of the labour power commodity, and, by the same token , quantifies its input into the production-as-valorisation process as variable capital.

By consuming the means of subsistence, the worker does not only reproduce herself, she reproduces capital. To the contrary: leaving aside the monetary form particular use values assume by necessity in their fetishistic mode of existence as their common expression — which alone gives them their particular capitalist form — is to misrecognise the specificity of the capitalist form of production:.

Leaving aside money also means to regress behind the use value-centric conceptualisations of social reproduction we find e. Nothing that capital, in its drive for surplus value, can commodify, is exempt form this law — in fact, if there is something that capital cannot commodify, it has no social value, neither objectively nor subjectively.

But Walker insists on the presupposition problem:. But where is there a problem of presupposition? Without labour inputs in the form of the source of value in exploitable labour power, there would be no capitalist social relation to speak of. Most wage workers receive their pay check for January in February. But is this necessity of inner coherence, as Walker insists, really only an illusion?

For Marx, this is a consequence of the capitalist reproduction process itself. This imposition of value in its specific monetary expression onto the qualitative, i.

Regimes of training, medical care, education — why not mention the recreation and entertainment of the working class — are however exchanged as units of commodities , exchanged for units of money. Quantification, as we have seen, is the only way that capitalist society relates to itself, namely through the value form of money. In this context, a certain common objection to the real subsumption of labour under capital, or concrete under abstract labour, can be noted.

The actual and real subsumption of use value under the quantifying real abstraction of value and socially necessary labour time is formulated as a critique by Marx, not as a cause for celebration. It not only forgets that the production of use values as the theoretical site of analysis is beside the point for the specifically capitalist relations of production — i.

Capital and wage labour this is what we call the labour of the worker who sells his own labour capacity merely express two factors in the same relation. Money cannot become capital without being exchanged for labour capacity as a commodity sold by the worker himself.

Labour, on the other hand, can only appear as wage labour when its own objective conditions meet it as egoistical powers, as alien property, value existing for itself and holding fast to itself, in short as capital. So if capital can only consist from the material point of view — or from the point of view of the use values in which it exists — of the objective conditions of labour itself, these objective conditions must from the formal point of view confront labour as alien, independent powers, as value — objectified labour — to which living labour is the mere means of its own preservation and expansion.

Wage labour, or the wage system, is therefore a necessary social form of labour for capitalist production, just as capital, potentiated value, is a necessary social form which the objective conditions of labour must assume for the labour to be wage labour.

Wage labour is therefore a necessary condition for the formation of capital, and it remains the constantly necessary presupposition for capitalist production. So although the first process, the exchange of money for labour capacity, or the sale of labour capacity, does not enter as such into the direct production process, it does in contrast enter into the production of the relation as a whole.

Already under the conditions of the formal subsumption of labour, the buyer of labour power confronts the seller as the owner of the objective conditions of labour objektive Arbeitsbedingungen. In the next chapter, we will demonstrate how Uno further mobilises the sphere of use value against value in his examination of simple circulation. The other two laws concern the Law of Value and the Law of the Equalisation of Profit Rates, which will become thematic in Chapters 3 and 4, respectively.

Own translation see also the translation by C. Erlenbach in Historical Materialism Uno [], p. See Uno [], p. We decided to stay closer to the original stress on systematicity suggested by the suffix. To differentiate between the monograph and the subsection of the Introduction to the edition of the Principles , however, we chose a more literal translation of the respective titles.

It is telling that as early as in the edition Marx refers to the Grundrisse Introduction, the same passage that becomes relevant again in the Methodology. See Kakuta , p. Kakuta , p. These capitals are also most closely linked to big banks that provide them with the credit needed to make large-scale investments, and it is in the interest of these banks to enhance the monopoly power of their clients.

In the end, the big banks end up controlling even the monopoly industries they finance, which is why Hilferding calls this the phase of Finance Capital. Since the aim of a socialist party is to change society by means of an organised political movement, it should either support or oppose economic policies, depending on their usefulness to its strategic aim. Because for reasons of space, it is impossible to reproduce this now famous debate, further reading is advised. Gayle Marx , p.

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IOS Press, Amsterdam, pp — Rev Radical Pol Econ 29 3 — The market price of a commodity is only the monetary expression of that value money itself being a commodity.

The market forces of supply and demand only account for the fluctuations in the price of a commodity, but do not in any way explain this exchange value at the point when supply and demand are in equilibrium. The basis of the capitalist system is production for the sake of profit. This profit is derived from surplus value, which is the unpaid labour of a worker. But how is this possible when all workers are paid wages?

The answer, in short, is that workers are not paid the full value of what they produce. This surplus is then either re-invested into production, or pocketed for the consumption of the capitalist.

The fact that capitalism produces for profit — that workers produce more value in a day than they are paid back in the form of wage - means that the wages of workers can never exceed the value produced in society. As a result, workers will never be able to buy back the full value of what they collectively produce.

But as a class, workers — i. Anyone that has to sell their labour power for a wage is classed as a worker, part of the working class.

This class makes up the vast majority of the population, and therefore also accounts for a large part of the market for commodities.

These facts alone leave the capitalist system prone to overproduction — to produce more than the market can absorb. Multiply this by the amount of other capitalists competing with each other over this limited market and we get a more accurate picture of the scale of this problem.

Each capitalist is interested in maximising profits. The rational choice for the individual capitalist, therefore, is to reduce their labour costs - i. Meanwhile, this same capitalist hopes the other capitalists will pay their workers as much as possible, in order to be able to afford the goods that they produce. However, when every capitalist makes this same "rational" decision, it leads to a situation that is extremely irrational for capitalism as a whole: wages are driven down; unemployment is created; the market for goods shrinks further.

Capitalism cuts away at the very branch that it is sitting on. It creates and destroys the market at the same time, by squeezing more and more surplus-value out of the working class, while attempting to hold down wages to the bare minimum. This is quite different from previous economic systems that did not produce primarily for the market. Contrary to what capitalist economists would argue, capitalism does not produce on the basis of what is needed in society, but on the basis of what is profitable.

The capitalist is unable to consider the limitations of the market, which arise as a result of production for profit. In order to survive, each capitalist must make profits, and therefore an endless stream of commodities must be pumped into the market. Eventually the market reaches a breaking point as it becomes saturated by commodities that cannot be sold; the system ends up in crisis — crises of overproduction.

But the question must be asked: if overproduction is inevitable, why is capitalism not always in a state of crisis? China, for example, seems to be doing relatively well in comparison to Europe although the economy is slowing down there also. Despite the economic laws explained above, which explain how overproduction and crises are inevitable under capitalism, there are countervailing factors to be considered too —ways in which capitalism avoids and delays the onset of crisis, but only by paving the way for a bigger crisis in the future.

In the past few decades, the main solution for the ruling class has been credit. Credit can allow a greater amount of consumption to take place — for the capitalists to artificially expand the market in the short term at the expense of creating a bigger crisis in the future. This current crisis is so deep precisely because the credit boom that preceded it laid down the foundations for an even worse crisis, as debt must be paid off eventually.