One of the fundamental places where Marxists disagree with bourgeois economists is around capitalist economic crisis.
Bourgeois economists try to pin the blame for economic crisis in capitalism on scapegoats. Usually the scapegoats are sections of the working class (like undocumented workers) or on organizations/programs designed to alleviate the exploitation and suffering of the working class (like unions and social security).
Other times they try to simply pretend that the economic crisis is a fluke, an accident, a glitch in an otherwise perfectly functioning system of the capitalist drive for profit. All of these have been the responses of the bourgeoisie to the current capitalist crisis which started in 2008 and shows no signs of slowing down. In fact, according to most commentators, the world capitalist economy is on target for a “double-dip” recession with ramifications that most people hate to consider.
But whereas the bourgeois economists try to scapegoat workers for crisis, or pretend that the crisis are just a blip and will be over soon enough, Marxists understand that economic crisis are built into the system of capitalism and will continue to occur periodically as long as capitalism exists.
The very nature of capitalism (multiple competitors producing anarchiclly to secure the biggest share of the market) most hit periodic crisis for two main reasons:
1) Over-production
2) Diminshing profits from mechanization of labor
OVER-PRODUCTION
The first point is easy enough to understand. There are, for example, tons of car companies. Off the top of my head I can think of Toyota, Hyundai, Kia, Ford, Dodge, Lexus, BMW, Volvo, Volkswagon, Honda, and Tata. And these are just car companies that I was able to remember. I am certainly missing several others. But the point is this: each of these companies wants you to buy one of their cars.
They also want everyone else with money to buy one of their cars. But no one has gone out to find out exactly who actually wants a car, nor who actually has the money for one in the first place. And they dont intend to find out, becauae that would requier democratic planning, which would eliminate the competitive element of capitalism. And capitalism without competition is not capitalism, but would instead be communism, and the capitalists aren’t ready for that social revolution.
So all of the companies I mentioned, plus the ones I wasn’t even able to think of, will produce as many cars as possible, hoping that they sell more of their own cars compared to their car manufacturing competitors. Obviously, not everyone on Earth needs, wants, or can even afford a car. So on a long enough timeline their is a glut in the market. Too many cars and not enough people to buy them. But the issue goes beyond this.
Cars, for example, are made of various raw materials that were mined from different parts of the world by workers. Those raw materials were then refined or transformed into other products or auto parts by othere workers, possibly in a different country than where the raw material was originally found. These refined or newly manufactured products are then sent off to the country with the car company to incorporate this refined raw material or product to complete the car.
Meaning that, a glut in the car industry does not just affect the car industry itself but also affects workers and economies all over the world that mine the raw materials, refine or manufacture other aspects of the car, and ultimately come here to complete the car. So what looked like it was just a glut in cars has created an international shockwave affecting the world economy.
This is a basic outline of how the 2008 crisis began, except that instead of a glut in cars, the over-production occured with homes. Too many houses were built in the anarchy of trying to sell as many as possible to gain the biggest profit. In addition, other industries (like the banking industry) tried to cash in on this by “over-producing” mortgages. They tried to get a little extra out of these mortgagea by adding predatory lending and hedge fund speculation into the mix, creating one of the most destructive financial “bubbles” in recent history.
DIMINISHING PROFITS FROM THE MECHANIZATION OF LABOR
This next one is a mouthful, but bear with me here. For starters, Marxists don’t see value simply as a ratio between supply and demand. We agree that supply and demand plays a role in determining the monetary value of a product, but we say that the greater part of a products value comes from labor. This is called the “labor theory of value.”
Lets take a quick minute to explain the labor theory of value before moving on with the issue of diminshing profits from the mechanization of labor.
Labor theory of value in a nutshell:
You have a great idea, but an idea does not make you rich. An idea is immaterial and useless as long as it is stuck in your head. Hiring workers that produce your idea in the real world with natural resources to then sell it on the market while paying those workers less than you pay yourself is where profit comes from.
Diminishing profits from the mechanization of labor in a nutshell:
The more you mechanize the labor of those workers, the less value the product they produce has, as the easier it is to produce something the more its value dips, the less you can charge for the product and the less you pay the workers.
The issue of overproduction and diminishing profits from the mechanization of labor are not mutually exclusive either. These issues are constant threats in the capitalist system and often complement each other. For example, with the housing crisis, new machines make the matereials necessary to build homes, and the actual process of building faster and easier, which lowers the value of the homes. At the same time that the necessary materials and actual process of building homes has been further mechanized, the bourgeoisie continue over-producing homes until there is a glut that shuts down the world economy leading into the Great Recession.
This was, of course, a simplified sketch of events. But at its core these are the fundamentals of both the current crisis and periodic economic crisis in capitalism more generally.
WHY UNDERSTANDING CAPITALIST CRISIS IS IMPORTANT
As mentioned in the beginning, these crisis are built into the competitive nature of capitalism. A system based on competing firms is an economy based on reckless, undemocratic, production for pkroduction’s sake. As long as capitalism exists it will always produce for the sake of production with the intent to maximize profits.
If capitalism was capable of expanding into infinity then it would be theoretically possible for everyone to eventually become rich and there would be no need to overthrow capitalism. Instead of redistributing the wealth, or redistributing the “pie,” we would just “make the pie bigger.” this was basically the dogma behind neoliberalism with its fanatic support for free trade. “if the capitalists can make moree money they can trickle down greater wealth to the masses so they don’t have to fight for better wages or greater social spending.”
The current crisis, with its desperate need for more and better funded welfare programs (i.e. welfare itself, social security, unemployment insurance, etc.) as well as the need for government job creation are more glaringly necessary now than ever before.
So the point is capitalism cannot expand into infinity but instead will periodically launch millions and even millions of people into desperate poverty. These periods of hyper-oppression and hyper-exploitation create both the ideological basis and practical need for revolution.
The crisis create a scramble between the capitalists domestically and internationally to force each other to pay for the damage (think of the way that France and Germany are trying to get Portugal, Italy, Ireland, Greece, and Spain to pay for the crisis) as well as trying to get the workers in their own countries to pay for it while the capitalists who caused the crisis get richer (think of the bailouts Bush and Obama gave to the banks while letting working class people suffer forclosures and wage cuts).
But the world is not simply divided between politics and economics. Both are connected at the hip and shoulders in the real, living, breathing world. Capitalist crisis leads to divisions between capitalists on how to resolve the issue. The choices they make (like the austerity measures in Greece) or the inability to offer any solutions (like in Egypt) opens up disputes between domestic capitalists on how to appropriately handle the situation in the interests of capitalism.
When the bourgeoisie flinches and their iron fist is even briefly loosened by their infighting or indecision, the proletariat catches a glimpse of freedom and an opportunity to resist. When the bourgeoisie’s iron grip is loosened there begins to open an ideological gap in which the brutality and obsolescence of the bourgeoisie’s ability to command society is exposed. This opens up new horizons for workers where they see an opportunity to unite and push their master to give in to their demands.
The more the proletariat push the more they start to realize that they can do more than simply push, they can even overthrow! Capitalist crisis therefore are built in political crisis for the capitalists as well as built in OPPORTUNITIES for the working class SO LONG AS THE WORKERS ARE ABLE TO GENERALIZE THEIR SITUATION, IDENTIFY THEIR OPPRESSORS, AND UNITE TO RESIST/OVERTHROW THEM.
By “generalize” I mean that workers are able to identify the situation as affecting them all collectively and that the only solution can be found by collective action.
The last time the world saw a major depression was in the 1920-30s. Though it was by no means automatic, that was one of the last major episodes in history where capitalist crisis ignited the US labor movement which fought and “pushed” the US bourgeoisie to hand over the New Deal which included social programs that were previously considered taboo.
The programs of social security, welfare, the right to unionize, etc. Were all handed down to AVOID revolution. That was what we were able to win then. The question is what can we win now, or else risk letting the bourgeoisie use this crisis to their own advantage by further scapegoating social welfare programs, unions, and immigrants.
Because capitalist crisis is potentially an opportunity for emboldened class struggle. But it is also potentially an opportunity for the bourgeoisie to clamp down harder on workers and get us to blame ourselves and each other for the crisis. They can use this chance to convince us that “we all need to tighten our belts” while in reality the rich get their tax cuts and we get wage cuts.
For a more intelligent discussion and understanding of crisis theory, please see this article in the International Socialist Review: http://www.isreview.org/issues/32/crisis_theory.shtml