Crisis! – overaccumulation

Crisis and the Overaccumulation of Capital

We can’t understand anything in isolation. We only understand things by comparing them to something else. If we are to understand why a capitalist economy goes into crisis we need to compare capitalism to something outside itself. Through such a comparison we can begin to see what is distinctive about capitalist crisis.

In order to make the most striking comparison, here we will use the example of a primitive hunter-gatherer society. The economic life of these early societies were extremely simple because there was no differentiation of work activities. Labor was a collective effort in which everyone participated to the best of their ability. The products of that labor were shared amongst the community according to need. The economic structure of these early primitive-gatherer societies was a large undifferentiated whole. There was no possibility of internal economic crisis because there were no internal parts that could be in conflict with each other or get out of synch.

Economic crisis, then, was external. Drought, cold, fire, disease, predators…. The brutal forces of nature had their way with early man. It was this opposition between man and nature that defined life for early man.

Fast forward a few millennium…

Capitalism could be seen as the polar opposite of this. Our vast productive abilities have enabled us, for the most part, to be free of this opposition with the natural world. By producing a social surplus, we can store up goods to feed us in times of drought, to shelter us from the ravages of storm and cold. This tremendous productive ability is accompanied by a tremendous differentiation of economic activity into separate parts- millions of different productive units (workers, companies, banks, governments) all coordinated through capitalist markets. When crisis hits a capitalist society it is not because of some external shock, but because something has gone awry internally. The mechanism by which all these different labors are coordinated has broken down. Crisis in a capitalist society is not a matter of man versus nature but of man versus himself. We might even say that the external conflict has been internalized.

How are all of the different productive activities of a capitalist society coordinated? Rather than sharing in one collective laboring effort like in a hunger-gatherer society, capitalist production is separated into millions of separate labor processes all coordinated through the exchange of commodities. By exchanging commodities in the marketplace the labor of tomato pickers, car makers, hair stylists and coal miners is coordinated. The private labors of these individual labor processes (tomato pickers, car makers, hair stylists and coal miners) each make up just one small part of the total labor process of society. Their labors are represented in the form of commodities. What at first glance appears to be just physical objects exchanging with one another is actually a complicated process whereby the various components of a social labor process are brought together. Karl Marx remarked about this process that, “Material relations between people become social relations between things.” That is, commodities become representations of these tiny parts of the collective labor process.


Commodity exchange implies a notion of value. While in previous eras people labored in order to make things for themselves, capitalist production means working in order to make commodities to sell. Commodities don’t just have a subjective value to the people who use them (a use-value). They also have an objective value, their exchange-value, which expresses their value relative to all other commodities. (We don’t just worry about whether or not we want a commodity; we also worry about how much it is worth relative to other commodities). Value expresses the amount of labor represented by a commodity. It is through this exchange of values in the market that all of the different parts of the social labor process are coordinated. We measure value in money.

So the social relations between people in a capitalist society are regulated by commodity exchanges. And commodity exchange is organized around values. “Value”, in the economic sense, is a very peculiar concept, unique to capitalism. Value is produced by the private concrete labor of an individual worker or group of workers. Yet this labor only has value to the extent that it is part of a larger social labor process happening all over the world. Through exchange the value of my individual labor is measured against the value of everyone’s labor. When we say that crisis in internal to capitalism we mean that something has gone awry with the way value regulates this commodity exchange.

Accumulation and Overaccumulation

[Money is also a very peculiar thing. We use money to measure value. It helps us exchange one commodity for another (C-M-C). In capitalism another use of money also becomes possible- M-C-M: A capitalist begins the day with money (M). (S)he sets this money in motion producing commodities (C) to sell. At the end of the day (s)he has more money (M). Whether a capitalist invests directly in production or loans money out as credit they are engaging in M-C-M. Thus the total amount of value in society is constantly expanding.]

Money is also a very peculiar thing. We use money to measure value. This allows money to act as an intermediate stage in the exchange of commodities: rather than directly bartering I sell a commodity for money and then use that money to buy a different commodity. But the opposite can also happen: I can spend money on the production of commodities and then sell those commodities for money. It only makes sense to do this if I end up with more money. This is exactly what capitalists do all day long. They turn their money into more money by investing in production (or loaning money). When capitalists accumulate more money they are accumulating more value. Thus the total amount of value in society is constantly expanding.

In previous societies the rich were primarily concerned with accumulating specific things (use-values): land, subjects, riches, etc. In a capitalist society it is money itself, as the representation of abstract human labor, that is the goal of accumulation. Instead of pursuing particular qualities of commodities the capitalist is interested in gaining greater quantities of the same thing: money. Because humans can always work more, always produce more value, there is no limit to the amount of value that a capitalist can accumulate.

Eventually Genghis Kahn would have run out of desert to conquer. Pizarro could only steal so many riches from the Incas. The Pharaoh could only build so many pyramids. But the capitalist can grow and grow, seemingly without limit. Hence the amazing, dynamic trajectory of capitals growth- a system that in a few hundred years has conquered the globe, revolutionized the lives of everyone on it, destroying old societies and creating new ones out of their ashes… always getting bigger.

Because there is no limit to the amount of value that can be created the only thing the capitalist worries about is where to invest to make more money. As long as money can be turned into more money the economy is in good shape. But if there is ever a reason why money can’t find profitable investments we are in trouble. When money can’t be turned in to more money the Crisis! sirens go off on Wall Street. Capital freezes in all the stages of it’s circuits and economic activity grinds to a halt. The only solution is to devalue capital: to sell off excess commodities at discounts, to close factories, fire workers, write down assets, foreclose on mortgages, etc. When capitalist accumulation overreaches its own ability to grow it has no choice but a violent purging of value from the system. This is what a crisis is.

Nowadays we talk a lot about the external, ecological limit to capitalist growth. But value theory is interested in a different limit- an internal limit lodged in the very heart of capitalist accumulation. When the accumulation of value hits a limit it appears as a crisis of over-accumulation: an excess of capital that can’t find profitable investments. This manifests itself as idle factories, factories with excess capacity, shelves of unsold commodities or partially finished commodities, unemployed workers, debt which can’t be paid, devalued real estate, etc. Value theory argues that the same process whereby value is accumulated generates its own limits. Let’s take a closer look as to how this happens.

Labor and Capital

In order for a capitalist to turn his money into more money there must be a commodity which is capable of creating more value than it costs. This commodity is, of course, human labor. The amount of money paid to workers in wages has nothing to do with the amount of value they produce. These are two entirely distinct quantities of value. (We often refer to this as the difference between the use-value and exchange-value of labor power. The use-value is the capacity for creating value and the exchange-value is the cost of reproducing the worker.) The more labor a capitalist gets out of his workers relative to their wages, the more surplus value the capitalist makes, the more profit he makes, the more the economy grows.

This means that there is a fundamental antagonism between the interests of capitalists and workers. The more surplus value the capitalist extracts from his workers the better he is at being a capitalist. The better the working class can resist this exploitation the more they defend their own interests. This antagonism lies at the very heart of the way value is created in a capitalist society. Let’s look then at how this antagonism generates limits to accumulation.

Though labor and capital are antagonistic they are also mutually dependent. Without capital workers wouldn’t have jobs. Without labor capital wouldn’t be able to turn itself into more value. When workers become too powerful they can demand higher wages from capital which means less profits. So capital looks for ways to free itself of its dependence on workers. The name for this is “efficiency.”

That sounds like a weird definition of efficiency but this is precisely what lies behind the capitalist obsession with efficiency. When the labor process becomes more efficient it means that the same task can be done with less labor. It also causes much of the labor process to be simplified, meaning that jobs require less skill and lower wages. This all makes workers easily replaceable and makes capital less dependent on labor. Capital can lay off workers or pay them less and workers have less power to resist.

More efficient production also allows capitalists to out compete their rivals. Since prices are set by the average productivity of labor, if a capitalist can cause their workers to be more productive than other firms then they can take advantage of this difference between their firms productivity and average productivity to make extra profit.

But as much as capital may try to free itself from labor it is always ultimately dependent on labor to produce value. So there is a real and dangerous contradiction between the dependency on labor to create value and capital’s drive to rid itself of this dependency. It is this antagonism which creates the crisis of overaccumulation: capital goes looking for profit and can’t find enough places to make profit because it has annihilated its own ability to create value.

Let’s look a little more concretely at how this happens.


Since it’s emergence on the historical stage capitalism has displayed a remarkable ability to innovate. Vast revolutions in our technological abilities, from transportation to communication to production, have created revolutions in every aspect of our lives, altering even the ways we experience space and time. The primary drive in all of this has been to decrease the amount of time required to produce a commodity. Yet while such technological revolutions have often triggered enormous economic booms they have also eventually destabilized value relations and opened the door for crisis. We have to remember that anytime we increase the efficiency of the labor process this means that the product represents less value.

When workers are replaced by machines this means less labor input per commodity… which means less value per commodity. If just one capitalist does this he can produce commodities more efficiently than the social average thus turning the difference into excess profits. But this encourages other capitalists to follow in search of these same excess profits. Once they all introduce more machines into their labor process a lower average productivity is reached and the prices of commodities fall. But the expense of making a commodity has gone up due to the cost of adding new machines. This can manifest itself as a falling rate of profit. (See video on falling rate of profit.) When profit rates fall this means that capital can’t find profitable places to invest. Money can’t be turned into more money fast enough. The circuit if capital (MCM) grinds to a halt.

Fixed Capital

The worker finds himself surrounded by an increasingly complex array of machinery all designed to purge human labor from the production process. Capital finds itself entangled in larger and larger investments in machines while the value of their commodities keeps falling. But what if the price of machines are falling as well? If new machines are constantly being purchased at cheaper prices this could stabilize profit rates in the long run.

But much of the machinery in a capitalist society is built to stay around for a long time. Auto factories, oil refineries, steel plants, gas pipelines, etc. all entail large start-up costs and years of construction. It takes these investments many years, perhaps even decades to pay off these initial start-up costs. We call these machines that stick around for a long time “fixed capital.” Fixed capital introduces all sorts of complications into value relations. Capitalists are committed to the use of fixed capital, to a certain level of efficiency, for some time even if the value relations around them are changing. For instance, if you build a factory for a million dollars in 2000 that has a maximum capacity of producing a thousand widgets a year… and then your competitors all build factories in 2005 that cost half as much to build but produce more widgets… you are screwed because now you have to sell your widgets at a loss. And you can’t just go buy a new factory because you still haven’t paid off the old one.

The current problem in the US auto-industry is a perfect example of this problem. The US auto-industry dominated world markets after World War II. But as the Japanese and German economies began to revive they built more efficient factories with new, cheaper fixed capital. (The costs of these fixed capital inputs had fallen over the years.)  The Germans and Japanese began to produce cars more cheaply and undercut American car production. This sort of competition effectively devalued the existing stock of fixed capital in the US, yet the US couldn’t just abandon its factories and build new cheaper ones because it still hadn’t recouped the costs of its initial fixed capital investments! This led to the economic crisis of the 70’s in which Nixon had to devalue the dollar in order to make US commodities more competitive in global markets. (This is all a huge oversimplification.)

The US auto-industry found itself with an overaccumulation of fixed capital that could no longer produce enough value to stay competitive in the world market. This particular overaccumulation manifested itself as excess capacity, but overaccumulation can take a variety of forms. In our current crisis we can see many different types of overaccumulation. Retail sales are down and commodities are bunching up in warehouses. Industries are struggling to shed themselves of excess capacity by closing factories and firing workers. The ranks of the unemployed grow by the tens of thousands every month. Real estate is over-valued. There is an excess of credit unable to be paid off. In all these cases there is too much capital stuck somewhere in the circuit of capital, unable to move to the next stage.


In all these instances the solution to overaccumulation is devaluation. By reducing the prices of commodities, closing factories, firing workers, cutting wages and benefits, writing down debts and slashing real estate values capitalism can devalue capital in all of its stages. This process of devaluation- this violent purging of the system is the necessary antidote to the problem of overaccumulation. This is what a crisis is- a drastic process of devaluation.

Though devaluation will drive many capitalists out of business, some will survive. Those that do survive come out on top. They are able to buy up the assets of their competitors at devalued prices as we have recently seen Bank of America do. Crisis is often a time of massive capital consolidation.

In a crisis the capitalist class battles over who will absorb the brunt of devaluation. Will it be the banks and credit agencies that finance production? Will it be the productive capitalists who drove down profit rates with their fixed capital and excess capacity? Or will devaluation be displaced geographically?

One of the most common strategies for devaluing capital is to devalue the currency. This devalues all capital relative to other countries making a country’s commodities more competitive on foreign markets. Devaluation of the currency effectively socializes the costs of devaluation meaning that all commodities, capital and labor are devalued. When Nixon devalued the dollar in 1971 this made all US commodities cheaper and better able to compete against the Germans and Japanese. But the long term effect of this was to trigger a long process of competitive devaluations as different currencies adjusted relative to other currencies all trying to shift the burden of devaluation onto some other country. The Asian financial crisis of 1997 showed us how reckless and destructive this strategy can become. It will be interesting to see how the process of competitive devaluation plays out in the current economic crisis. Who will be forced to bear the brunt of devaluation? What political alliances and battles will form out of this global conflict over devaluation?

Another strategy is to postpone devaluation in time through the use of credit. This has been a major strategy for displacing crisis since the 70’s. When profitable investments can’t be found in production capitalists can pour their money into loans, mortgages, hedge funds, etc. This creates the illusion that their money is still in motion, that it is still generating more value. But a lot of time this just means that debt is just being passed from capitalist to capitalist… This can create enormous bubbles of credit values not backed by any real value at all. (see my video “What is Credit?”) The insane over-investment in credit markets (accompanied by an insanely low rate of interest) before the recent bubble burst is evidence of the lack of real actual profitable investments in the global economy relative to the amount of capital needing to be invested.


When we say that crisis is internal to capitalism this means several things. It means that the method by which all of the laborers of a capitalist society are coordinated, value, creates antagonisms that destroy that very coordination. Value as a coordinating mechanism spawns class antagonism between a capitalist class that exists to appropriate this value and and a working class that must be exploited if capitalist accumulation is to take place. And this class antagonism is reflected in the antagonism between man and machine- the conflict that drives accumulation forward toward its own destruction.

Capitalism is a system rife with such dynamic, explosive internal antagonisms. What else could explain the cycles of boom and bust that have rocked capitalism since its inception? When we say that crisis is internal to the structure of capitalist social relations we mean that the very way our social relations are structured are dangerously unstable. While the mainstream political discourse debates which capitals to devalue and how to initiate the next boom phase we must remember that a true solution to capitalist crisis is to redraw the basic mechanisms of these social relations. If we can’t understand capitalist crisis without comparing it to something outside of itself we also can’t solve capitalist crisis by confining our logic to the internal logic of the system. We must appeal to a future stage of history: an organization of social relations without accumulation based on exploitation.

Das Kapital- Karl Marx
Limits to Capital- David Harvey
“Turbulence in the World Economy” by David McNally in the Monthly Review; June 1999 (
I also recommend the following series of papers/lectures:

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18 Responses to Crisis! – overaccumulation

  1. Jeffrey Curtis says:

    I got Limits to Capital for Christmas and have read about 3/4 of it. When I got to the part of overaccumulation it didnt make sense. I figured you would be making a video on the topic, although I fliped through some articles on the topic as well as read through Henryk Grossman’s ‘Law of Accumulation’ and Paul Mattick’s ‘Economic Crisis and Crisis Theory’ (Christmas). Unfortinately, Harvey, Grossman, Mattick, most of the articles and your video presented a very vague picture of what overaccumulation is.

    Most explinations focused solely on the falling rate of profit, which creates theorectical problems. For one, if the rate of profit is not zero or below, can’t the circuit of capital continue without problems (assuming balanced growth and the like)? Two, if as many overaccumulation advocates claim, the rate of profit does not have to equal zero across the board to create its crisis, then at what point does the rate of profit fall to the point of crisis? This creates a contradiction within the argument, unless we include other elements of the falling rate of profit tendency. If we look at the various relationships that go one within profit, in other words dialectically, crisis stares us in the face rather then being vague.

    The first relationship to be looked at should be between the rate of profit and the mass of profit. As capital accumulates, this means more constant and variable capital are being invested, which should mean more surplus value and thus a greater mass of profit. This is occuring while the organic/value composition of capital is rising, so we have a falling rate of profit next to a rising mass of profit. As the rate of profit falls, it starts to conflict with a continous rise in the mass, after all a rate of profit or zero or below does not produce an infinite mass of profits. Since the goal of capital is to accumulation as much as it can as fast as it can, a falling mass and rate of profit do not suit well. In order to raise the rate and thus the mass of profits, the countervailing tendencies are pushed into full force.

    So the second relationship to be studied is between the countervailing tendencies and capital accumulation. As capital accumulates its creates the ability to engage in countervailing tendencies, it creates cheaper machines, cheaper consumer goods and a reserve army of labor at various points. This in itself creates certain problems, specifically a contradiction between the long term needs of capital to grow and its short term freeze. By looking at the countervailing tendencies, we see the basic building blocks of an economic crisis.

    1) Reducing the value of constant capital: If a machine was bought at $100 at the start of the production process, but by the end is only worth $50 on the market, then that $50 is subtracted from profits. This could eventually bring profits to or below zero, thus cancelling out the point of investment.
    2) Reducing wages and increasing the reserve army: By creating a reserve army and reducing wages, the profit rate increases. This is not so much a crisis for capitalism as a crisis for the working class which through struggle could become a problem for capitalism.
    3) Reduced spending in constant and variable capital while maintaining or increasing surplus value: As capitalists attempt to cut back on C+V spending, this cuts the demand for both means of production and consumer goods, thus to underconsumption.

    These occurances would develop many other phenomenon associated with capitalist crisis. As problems develop in both producing and realizing value, money either becomes idle or is invested in speculation which creates credit bubbles or the illusion of a rising mass and rate of profits until they pop. Since value in all its forms is being either left alone or destroyed, the reflex value of money or its only value as non-commodity money falls, thus inflation.

    I think this interpretation is important not only because of its dialectical economic analysis, but also its political implications. Depending on whether one believed the falling rate of profit to be true or not, we got either Keynsianism or the ‘Socialism or Barbarianism’ arguments, both illogical and prone to authoritarianism. The theory presented shows us the capitalism is not in an era of decay, but that it faces cycles of boom and bust which are opportunities for revolutionary change when something can fill the void. We therefore must look not at the destruction of capitalism in a negative sense, but rather its development of capital’s contradictions that transform our world into a communist society from capitalism. To look at capitalism in the former sense is to reify capitalism and communism as stages, the first to be destroyed and the second to fall into place.

    One essay on this interpretation is ‘The Dialectic of Capitalist Crisis : Marx’s Law of the Tendential Fall in the Rate of Profit’ by Andrew Kliman

    • Jefferey you always have such insightful and interesting comments. Thanks for this one.

      I too found Harvey’s explanation of overaccumulation vague the first few times I read over it. I must have read over that section of the book a dozen times trying to figure out exactly what he thought the relation was between the FRP and overaccumulation. But after pondering it awhile and after listening so some Harvey lectures, as well as some other things like the McNally piece I mention in my bibliography I think that overaccumulation does seem to be a good catch-phrase for summing up this concept.

      The crucial thing about marxist crisis theory is that it explains what the antagonism is that destabilizes value relations and it explains the different factors that determine how this antagonism is manifested. The labor-capital antagonism lies at the bottom of the destabilization of value so that was my starting point. To this I added that the amount of value seeking to be valorized is constantly growing. This is all we need to see the potential for crisis. Overaccumulation is a useful description of this phenomenon b/c is implies that capital accumulates too much capital relative to its ability to valorize this capital… this happens because of the antagonism within the value form itself.

      Isn’t this the same as your comment about the rate of profit declining as the mass of SV rises? The Rate of Profit doesn’t need to hit zero. It just needs to shrink relative to the amount of capital seeking valorization. Once we understand this antagonism we can chart how it manifests itself via counter-vailing tendencies, credit distortions, geographical displacements, state intervention, etc.

      And I totally agree with you regarding the nature of crisis and revolution. On a related note I’ve recently been reading the new blog which looks like it will be a really good survey of the history of crisis theory.

    • Jefferey, I know the discussion on this thread ended a few months back, but I just dug an article by Alan Freeman on the FRP which deals at length with the “countertendency” that a falling cost of c counters the FRP:

      I thought you might find it interesting. It helped me understand the issue better, to put the various writings I’ve read on the topic in perspective, and to see a closer connection between the idea of overaccumulation and FRP- that is, that surplus value must always be invested in c, regardless of the price of c- that is, that the rising mass of value invested in dead labor rises as a basic law of accumulation.

      Also- I know there were a couple other comments you left sometime back that I never got to. It’s on my list. The one regarding money and Say’s Law actually gets to something i was never totally clear on in Marx or Harvey’s description of Marx on MCM arising from money, which is why I haven’t answered it. I think I will need to return to those readings and do some more thinking before I can answer articulately.

  2. Jeffrey Curtis says:

    While I understand that you want to make Marxism accessable to everyone, if it becomes too simplified this results in its vulgarization. Up until this point, your videos have been very descriptive of a capitalist mode of production, but this specific topic requires an extensive explination, especially in this time.

    Granted one might be able to see ‘mass of profits’ phrased as ‘valorization’, yet since your videos and many Marxists really only talk about the rate and not the mass, it could be harder for those not as interested in economics or Marxism to make this distinction. If this point had been presently more clearly in the books and articles, it would have made my attempts at understanding it easier.

    Also the contradiction between the tendencies and countertendencies must be explained. Many Marxian Economists saw this argument in a mechanical, one-sided way. Take for example Henryk Grossman, the original creator of the overaccumulation argument. He presented a ‘socialism or barbarianism’ interpretation, that the countertendencies would eventually be used up, preparing for a final crisis, seeing the Great Depression as that potential final breakdown. His book ‘The Law of Accumulation’ is structured with the tendency on one side and the countertendencies on the other, not in a unity, contradictory or otherwise, as dialectics would look at it.

    On some lighter notes, first I want to thank you for all the times you said my comments were insightful, definity lets me know Im improving. In between christmas and my birthday, I have about 20 books on Marxian economics and philosophy (nothing says holiday spirit and growing up like a copy of the Grundrisse), so I hope to refine my interpretations even more. Also, speaking of falling rate of profit comments, I left a new comment about 3 weeks ago, about education and its impact on the rate of profit as well as the class struggle that I would like you to look at.

  3. Aliva says:

    The theory presented shows us the capitalism is not in an era of decay, but that it faces cycles of boom and bust which are opportunities for revolutionary change when something can fill the void.

    Marx’s theory shows this for the business cycle. But when you say that capitalism is not in an era of decay, what do you base that off of? I highly recommend that you begin to get into long wave theory of capitalist development right away. Of course, Ernest Mandel’s contribution, The Long Waves of Capitalist development: A Marxist Interpretation,” is an excellent place to start.

    Here is an intro into the concept from his contribution:
    There is an articulation between the long waves of capitalist development and the normal business cycle.During an expansionist long wave, the periods of upturn, prosperity, and boom last longer and are more pronounced, and the recessions are shorter and less severe. Conversely, during a long wave of stagnating tendency, the periods of upturn and prosperity are shorter, more hesitant, and more uneven, and the recessions last longer and are more pronounced.

    Essentially, these long waves have durations of approx. 25 to 30 years. I say approximately because Mandel’s theory is for asymmetrical long waves meaning that the falling rate of profit and counter forces are not mechanical and set but of constant conflicting ones but in the end the law always asserts itself.

    Why is this important? Well because we are still riding a long wave of stagnation and have hit a wall.

    Let us assume very broadly, that the successful stages of the Industrial Revolution and of the first, second, and third technological revolutions(always warning against a too mechanical an interpretation of these stages and stressing the inevitable existence of transitional forms, corresponding to the law of uneven and combined development) correspond very broadly to the following machine systems: craftsworker-operated(and craftsworker-produced)machines driven by the steam engine; machinist-operated(and industrially produced) machines driven by steam motors; continuous-flow production machines integrated into semiautomatic systems made possible by electronics.

    There is no new technological revolution(from what I can see) that will help along an automatic expansive long wave.Brendan has already made a video about Machines and the Matrix that draws conclusions about the impossibility of continuance of capilalist commodity production with full automation. Will the machines buy up all the mass produced commodities? So decay? Well I would say that the couple of years ahead gong to be interesting ideed to see how Obama and the rest of the world will react and what kind of “system shocks” that they will implement to re-load the matrix. I’m beting it will be the same shit, as per usual, to keep capcom producting society alive. It ain’t going to be pretty.

  4. Aliva says:

    So socialism or barbarism? Either way its going to be a hell of a transition.

  5. Aliva says:

    Oh but their is still hope. Bolivia, yesterday, passed a new constitution by popular vote. Geez, sounds like citizens of a decaying empire to the north could learn a thing or two from South America. They actually elect assemblies that consult the people to help in the draft of a new constitution and then have popular elections to implement it by their will. Damn, now that’s real democracy for a transition towards a true pluralistic, democratic socialism.

  6. Jeffrey Curtis says:

    Decay in the sense Im using it discribes the way so-called Marxists have looked at the destruction of capitalism in terms of economics. Many only advance this destruction in a negative sense, in the deterioration of capital, yet Marxism also wants to create alternative visions, or in other words destruction in the positive sense.

    To prove the supposed death of capitalism in the negative sense, many turn to a mechanical reading of the falling rate of profit theory which has been done in this manner since WWI. The argument is straight forward enough, should the rate of profit ever hit zero, capitalism is finished. Everyone on the Marxian political spectrum from Rosa Luxemburg (Left Communist) to Henryk Grossman (Stalinist) endorsed such a reading and it become popular among Communist organizations in all forms, only to be accationally challenged by those who put emphasis on class struggle (Pannekoek).

    Marxism intends to prove that communism is the logical next step after capitalism, so we must ask whether this interpretation not only destroys capitalism, but leds to communism? So lets say we got to a point where the rate of profit did hit zero. Obviously as pointed out in Brendan’s Matrix video, the antithesis to the full automation of jobs is the full unemployment of workers. In other words the dynamic of the class struggle has shifted, now it’s the bourgeois vs the lumpenproletariat. The lumpenproletariat could support communism, but they have supported proto-fascism and fascism in the past (France, Italy and Germany). They could also support feudalism, slavery, anarcho-primitivism, republicanism, who knows.

    If we turn away from this mechanical view of the falling rate of profit, then my view comes into focus or a dialectical interpretation which you can look at above (1st Comment). We see that capitalism in theory can continue forever, even with crisis, but it produces some new problems. As capitalism develops, it is forced to develop the intelligence of the proletariat. An intelligent worker produces more abstract labor then an unskilled worker, hence more profit. As products are made with less labor, more use values are circulating all at once, this would create demand problems if too much bread for example is circulating around, so the wheat could be turned into whiskey instead. As our understanding of the natural and social sciences are developed, people see the need to develop those around them. Labor is our bond between other people and nature, as our ability to interact with our world improves, we will demand a better world to interact with. This makes sense as it seems to me most natural scientists are for the environmental movement and many social scientists are into left-wing politics. Increased intelligence also challenges old one-sided ways of looking at the world like racism, sexism, religion, homophobia etc. Alienation and Reification are challenged as necessary in our society as people become award of their place within it.

    So bit by bit we see an alternative world emerging out of the old one, communism emerges organically out of capitalism. Granted Im still looking into the topic of post-capitalism, but I think the picture has revealed itself to a certain extent.

  7. Aliva says:

    So lets say we got to a point where the rate of profit did hit zero. Obviously as pointed out in Brendan’s Matrix video, the antithesis to the full automation of jobs is the full unemployment of workers.

    In realistic(as well as theoritical) terms capitalism cannot go on forever. Full automation means the impossibility of profit. If every one is unemployed then where would they get their means of subsistence from? How would they be able to pay for it without employment? Productivity is through the roof but who would purchase this mass of commodities? How can they be sold and realized at a profit within a capitalist mode a production when no new value is embodied in them?

    That is the dilemma.

    So bit by bit we see an alternative world emerging out of the old one, communism emerges organically out of capitalism.

    This is a false. Throughout history we have seen the forces of reaction act towards the maintainence of what they know benefits them. You said it yourself. Why would today be any different? I think that racism, sexism, religion, homophobia etc. will get worse. The forces of reaction are moving full steam ahead.

    Let’s say your correct and that “communism” is organic out of capitalism what makes you think that that current owners of capital will gleefully allow their accumulated capital to “organically” fall from their hands? Don’t you think they will act in their interest to preserve it?

    I take it that you are of those who think that since Obama won that all of sudden racism is gone? If this is case then you are for a rude awakening. The mass of the people with full democratic rights in all aspects of social, economic, and political life is the only beginning. No specialized natural scientists will show us the way. The masses as a whole with all power in thier hand is the only way.

  8. Jeffrey Curtis says:

    First off Im getting the feeling you’re avoiding my economic argument. You keep pushing your economic interpretations without explaining why mine is incorrect. So, just that were all clear about my interpretation, Ill summarize it again.

    1: As the bourgeois fights either against increasing proletarian power or for market share, they will increase the ratio of c to v (just going over basics).
    2: As the organic composition increases, it creates the countervailing tendencies for the falling rate of profit (decreasing the value of c, throwing out workers, decreasing v and rising s etc.)
    3: These two tendencies come into conflict with one another making it harder to produce and realize profits (more on that in comment 1) at points in time, hence economic crisis.

    If we see that the falling rate of profit creates its own countervailing tendencies, then there is no necessary aggregate fall in that profit rate. The countervailing tendencies could cancel out the fall or increase the rate of profit, they can never be overcome as mechanical theorists would claim, they are necessary to the theory. At the same time this economic analysis supports my interpretation of communism out of capitalism. Increasing the intensity of work through education increases the rate of profit as a countervailing tendency (S and V increase generally if this is the case, an intelligent worker has more needs in terms of maintaining and enhancing their skills then an unintelligent worker).

    Now for some history lessons. Capitalism emerged organically out of Feudalism through the nation-state, it gave the small bourgeoisie enough power to steal the land from the peasantry and start free trade. In other words, it used power from the old mode of production to make the next one. The same can be said of Feudalism(an aristocracy entrusted with land during the slavery empires seperated people from their means of production) and Slavery(after a surplus product was created, classes developed from primitive communism). My theory of transition from capitalism to communism is no different, the proletariat will use advanced technology and intelligence to take power from the bourgeoisie, challenge reactionary ideologies and create their new society.

    Which leads to another point, you must think Im some kind of Revisionist or something to make those kind of insults (or jokes, can never tell on the internet). I see the class struggle as necessary to advance towards communism, but that wasn’t what I was arguing before. In all the examples above it was organic, but it was also a struggle, just as the growth of all life, whether plant or animal, is organic (building from the old) but also a struggle (new vs old). As for Obama, while it is an advance in some respects (those who voted which is like 30% or something were willing to elect a black president), its just another justification of the state by 30% (better then about 80% of the voting population 100 years ago).

  9. Jeffrey Curtis says:

    After thinking about what I said, I wanted to add some possible sources for my economic argument. The essay mentioned in comment 1 would be a good start.

    ‘The Dialectic of Capitalist Crisis : Marx’s Law of the Tendential Fall in the Rate of Profit’ by Andrew Kliman

    If you want what could be considered the original source (Engels toyed around with it a bit, plus it was semi-finished to begin with) would be chapter 15 of Capital Volume III, specifically sections 2 and 3.

    Finally for a mechanical interpretation of the falling rate of profit, I would recommend ‘The Law of Accumulation’ by Henryk Grossman, the re-discoverer of the overaccumulation argument, albeit in an underdeveloped form.

    • Since you mentioned Kliman, I thought I’d point out that he has a brand new article up on his website just posted over the weekend:

      The article is called “The destruction of capital and the current economic crisis”. Also, the rumor on the street is that Kliman is in the midst of a more in depth research project on long-term profit rates since 1929 part of which involves theorizing about the correlation between an “observed rate of profit” and the “underlying rate of profit”. Sounds like exciting stuff.

  10. Aliva says:

    1: I agree. This is exactly what Marx argued.

    2: I agree.

    3: These two tendencies come into conflict with one another making it harder to produce and realize profits (more on that in comment 1) at points in time, hence economic crisis.

    I agree that they are a dialectical whole. You will never ever hear me say otherwise. But you forget to mention what is key here. The economic crisis that results from the conflict between the falling rate of profit and the counter-forces are at a given level of technology(C) and organization of labor(V). So when the crisis hits it restores equilibrium from a given level of tech and organization of C and V . This given level is one of the things that defines a long wave of expansive growth and its eventual downward trend. It doesn’t mean that capitalism ends it means that a continuous crisis reduces it from one level of growth down to a lower one unless a technological revolution is initiated that revolutionizes(C) and (V) and helps to initiate a new level(long wave) of growth.

    When means of production become cheaper, already-existing capital, already-existing means of production, are devalued. The firms that invested in them when prices were higher suffer losses –– existing value is destroyed. The losses must be written off, charged against profits, and this can lead to bankruptcies, debt crises, bank failures, and other forms of financial collapse.

    I was arguing, very un-clearly(I apologize for that)above in 4, that this process that Kliman mentions in his essay is constantly repeated in the long term. The State has had to internalize and has accumulated these crises in the form of permanent inflation brought upon by expansion of credit moneys(finance capital). Today we are witnessing a large world wide crisis that is an expression of this contradiction.

    The Rate of Profit doesn’t need to hit zero. It just needs to shrink relative to the amount of capital seeking

    Brendan touched my point with this. What changes, in the long term, is the amount of capital seeking valorization.I believe that today a large portion of the worldd capital is ficticious.But I’m still studying to figure exactly if this is true.

    I never referred to you as a revisionist. It’s just that you made it seem that everything would just nicely fit into place and their would be no starvation or suffering on the part of everyday people towards a mode of production and re-production where they will democratically control all aspects of their lives. De-valuation means the suffering on the part of many in our societies. Where I live in Los Angeles the signs are already becoming clear for many that I know that are losing their employment and their wages and/or benefits. The State of this California is in a deep hole of debt and that is going to profoundly effect the lives of millions that are a part of the reserve army and your so-called lumpen.

    I was not trying to be offensive.

  11. Aliva says:

    Here are some of my sources:

    ‘El Gran Debate: Sobre La Economia en Cuba’ By Ernesto “Che” Guevara and other authors

    ‘Power and Money: A Marxist Theory of Bureaucracy’ By Ernest Mandel

    ‘Long Waves in Capitalist Development: A Marxist Interpretation’ By Ernest Mandel

  12. Aliva says:

    Also, I always visit this blog to see what appearances this crisis takes. This just focuses on that(appearance) but it is good to look and analyze the ‘essence’ of these.

  13. Al says:

    I understand the idea you present. In that, over-accumulation leads to a crisis followed by devaluation. However, under our “state capitalist” system (as Noam Chomsky has called it) we see various nation state governments borrowing money to, in their words, stimulate the economy. They also seek to provide capital in the form of money, loan guarantees, direct investment, etc. to financial institutions to overcome the bad debt crisis. Being interested in economics, I’m sure you are all familiar with the current situation.

    My question is, will the outcome of this over-accumulation (of debt) activity be the devaluation of the (US) currency itself.

    In other words, will the devaluation manifest itself as hyper-inflation?



    • You are right that we can’t understand the state without understanding the economic context the state is nested in. Often times antagonisms within capitalism are displaced onto the state. If the state takes on the role of buying up fictitious capital (debts), creating demand through state spending and social welfare, and jump-starting capitalist accumulation through funding innovations in technology and infrastructure it can internalize these antagonisms…. we get a fiscal crisis of the state. One possible manifestation of this might be the devaluation of the dollar.

      Mild devaluation of currency is a common weapon against overaccumulation. It allows one country’s products to be more competitive in international markets. But this can set off a chain of competitive devaluations as different countries adjust trying to out-devalue each other. This can be very dangerous. It remains to be seen what will happen with the dollar as it holds a very special privileged place in the global economy. I think that nobody knows for sure what will happen to the dollar. We will likely need some sort of new international-agreement between the major capitalist powers as to how to handle exchange rates now that the dollar is likely to lose it’s place as “world money”.

      We also don’t even need an irresponsible fiscal policy of the state in order to have inflation of the dollar. If the Chinese were to dump all the dollars they hold onto the market this could inflate the dollar. I’ve heard this referred to as China’s “nuclear option”.

  14. againstthemarket says:

    mcnally has a long article on the current crisis forthcoming in the next issue of historical materialism.

    for undergrad teaching, see his book Another World Is Possible (Arbeiter Ring: 2002).

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