Business Cycles and Crises

  • Makoto Itoh

Abstract

Capitalism as a historically specific social formation contains inner contradictions which appear most obviously in those periodical self-destructive crises, in the process of business cycles. The classical school and the neo-classical school treated capitalism one-sidedly as a harmonious economic order and disregarded both its historical character and its inner contradictions. A natural result was a lack of crisis theories in these schools. A great advantage of Marx’s Capital as compared to these schools is its comprehensive attempt to clarify the logical inevitability of periodic business cycles and crises from the basic contradictions in capitalism. However, Capital was left incomplete, especially in this field, and theoretical positions among Marxians have been diverse here. In my opinion, there are initially three major sources of confusion to be established and then cleared up as far as possible.

Keywords

Depression Income Explosive Clarification Mandel 

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Notes

  1. 1.
    G. Haberler, Prosperity and Depression (London: George Allen and Unwin, 1937, 4th ed., 1964) p. 7.Google Scholar
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  5. or N. Bukharin, Imperialism and the Accumulation of Capital, translated by R. Wichmann, (New York and London: Monthly Review Press, 1972), asserted the underconsumptionist variant of crisis theory as an orthodox Marxian position. In these classical arguments initiated by Tugan-Baranowsky, Marx’s theory of the reproduction schemes was much utilised in order to show the difficulties in maintaining the balance between various items in the schemes, although essentially it was an unsuitable theory for proving the logical inevitability, and not merely the possibility, of periodical crises, as we saw in Chapter 6, Section 6.3. More recentlyGoogle Scholar
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    ‘It is one of Uno and his followers’ contribution to Mandan theory to have underlined this aspect of Marx’s theory and to have attempted to show the logical necessity of periodical crisis through the working of the credit system and the interest rate. This corresponds to their position which emphasises the importance of the forms and the mechanisms of a capitalist economy besides its internal substantive relations of production. P. Bullock and D. Yaffe, ‘Inflation, the Crisis, and the Postwar Boom’, Revolutionary Communist, 3/4 (Nov 1975), contains one of the rare attempts among Western Marxians to examine how the credit mechanism operates up to the crisis, although it is based upon the rising organic composition variant of the excess-capital theory of crisis and so is different from the Uno School.Google Scholar
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    This is the moment when money appears as the sole incarnation of wealth, as was believed by the bullionists, and thus the ‘sudden transformation of the credit system into a monetary system adds theoretical dismay to the actually existing panic’ (K. Marx, A Contribution to the Critique of Political Economy, Moscow: Progress Publishers, 1970, p. 146 ).Google Scholar
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  25. 32.
    Russian orthodox studies of the theories and the history of business cycles and crises have not been entirely immune from such a tendency. See for instance L. A. Mendelison, [The Theory and History of Economic Crises], translated into Japanese by K. Iida et al., (Tokyo: OtsukiShoten, 4 vols, 1960–1), and I. A. Trakhatenberg, [The Money Crises], translated into Japanese by A. Oikawea, (Tokyo: Iwasaki-Gakujitsu, 3 vols, 1967–8). Their prestige was effectively weakened by the historical experience of the sustained long upswing in the post-Second World War period.Google Scholar
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  27. 36.
    J. A. Schumpeter, Business Cycles 2 vols, (New York: McGraw-Hill, 1939 ). As is well known, Schumpeter called the regular business cycles of between about eight and ten years duration ‘Juglar cycles’, and the shortest business cycles mainly due to fluctuations in inventory investment ‘Kitchin cycles’.Google Scholar
  28. 37.
    L. P. Trotsky, ‘On the Curve of Capitalist Development’, in Fourth International (May 1941).Google Scholar
  29. 38.
    E. Mandel, Long Waves of Capitalist Development (Cambridge: Cambridge University Press, 1980) pp. 21, 55. See also his Late Capitalism (op. cit.) ch. 4.Google Scholar
  30. 39.
    D. M. Gordon, R. Edwards and M. Reich, Segmented Work, Divided Workers (Cambridge: Cambridge University Press, 1982) ch. 2.Google Scholar

Copyright information

© Makoto Itoh 1988

Authors and Affiliations

  • Makoto Itoh
    • 1
  1. 1.University of TokyoJapan

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