Periodic Crises in Capitalism: Pathological or Restorative?

Author(s): STEFANO AGNOLETTO

Source: Science & Society , OCTOBER 2013, Vol. 77, No. 4, Special Issue: NEW
DIMENSIONS IN POLITICAL ECONOMY (OCTOBER 2013), pp. 459-485
Published by: Guilford Press

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 Science à? Society, Vol. 77, No. 4, October 2013, 459-485

-O

Periodic Crises in Capitalism:

Pathological or Restorative?

STEFANO AGNOLETTO

ABSTRACT: Ever since the latest financial crisis broke out, we have
been witnessing an unexpected revival of Marxist theories as part
of the effort to better understand the phenomena behind the
current crisis. Marxist analysis can achieve an appropriate hege
monic role in the public debate on the basis that distinctive Marxist
approaches provide a superior explanation for the current crisis. A
"Marxist perspective on periodic crises" can be based on the idea
that periodic crises are not to be considered as a pathology of the
market system, but as a natural outcome of the way it works. This
understanding of crises as a structural element in capitalist growth
has the power to increase our knowledge of reality. Moreover, the
core Marxist insight — crisis as a necessary restorative aspect of
capitalist accumulation rather than as an arbitrary disruption — is
necessary to the project of synthesizing the various elements in the
crisis literature: real vs. financial, general vs. contingent, periodic/
cyclical vs. long-term/systemic.

Introduction

have been witnessing an unexpected revival of Marxist theo

EVERriesSINCE
as part ofTHE LATEST
the effort FINANCIAL
to better understand CRISIS broke out, we
the phenomena
behind the current crisis. Marxist analyses could achieve an appro
priate and hegemonic role in the public debate, by pointing to a
superior explanation for the current crisis. From this perspective, it
seems necessary to discuss the foundation, in Marx's general politi
cal economy of capitalism, for distinctively Marxist views of periodic
crises. This paper does not offer a new or original Marxist-oriented
459

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460 SCIENCE ô3 SOCIETY

interpretation of the current econo

not Marx's (and Marxist) thoughts
tool with which to understand pa
Marx did not propose a systema
did, however, provide a range of in
that have defined a unitary perspec
Marxists, quite understandably, hav
of this material (such as overprod
rate of profit). I think that a synth
be useful. Such a synthesis must
tion that were only partially visibl
the question of financialization)
a coherent foundation.

For this purpose, I have tried to define the features of a "Marxist

perspective on periodic crises." My definition is based on the idea
that periodic crises are not to be considered as a pathology of th
market system, but as a natural outcome of the way it works. Th
aim is to evaluate whether the basic idea — which I consider to be
the common theoretical hypothesis that distinguishes all "Marxist
perspectives" on this topic — of periodic crises as structural elements
of capitalist growth has the power to increase our level of knowledge
of reality. I want to show that the core Marxist insight — crisis as an
inherent, restorative aspect of capitalist accumulation, rather than as
an arbitrary disruption of accumulation — is necessary to the project of
synthesizing the various elements in the crisis literature: real vs. finan
cial, general vs. contingent, periodic/cyclical vs. long-term/systemic
The starting point of this synthesis is the idea that Marx's and Marx
ists' various methods for describing periodic crises (overproduction,
underconsumption, disproportionality, falling rate of profit) are not
as mutually contradictory as has often been supposed.
I do not claim to provide any sort of original approach or con
ceptual breakthroughs. However, by quoting from multiple sources, I
want to point out the importance of a synthesizing rather than polar
izing approach to the different dimensions of Marxist crisis theory.
Moreover, I want to underline that arguing for a synthetic approach
does not amount to a proposal concerning exactly how this synthesis
is to be achieved. My purpose is just to highlight the possibility of such
a synthesis.

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 PERIODIC CRISES IN CAPITALISM 461

The Nature of Periodic Crises: Marx's Origi

In order to evaluate the significance of M

to recurrent crises, it is necessary to place
of his methodological and philosophical
if Marx's basic aim was to "lay bare the ec
modern society" (Marx, 1867, Preface to th
one of the central concerns of his analysis
production" was to identify and comprehen
tions, which would eventually create condi
with a new and better system of production.
I have focused on Marx's description of t
crises (the contradictions inherent in the capi
on an analysis of its political and systemic
mode of production). I am aware that this m
paradox, by studying Marxist theory while
approach. There is yet another basic theor
not leave a complete crisis theory. Consider
put a strong emphasis on crises in the Commu
works, this omission seems rather surprising.
One explanation for this contradictory atti
ical: Marx had planned to crown his econo
on the world market, the state, competitio
but, as is well known, he died before he could
hand, the answer to this deficiency may li
ning invariably at an abstract level and gradu
to concrete fact. Just as crises in practice are
basic contradictions, the theory of crises wou
critique of political economy. In accordanc
theory of crises would have to come last, an i
death. It is during crises, according to Marx,
tions of capitalist production — many of w
normal circumstances — rise to the surface.
A third explanation should be sought on a more theoretical level,
namely in Marx's classical background. I am referring to a Ricardian
perspective on Marx as a theorist of long-term equilibrium, in which
periodic crises would be described as "a phase in the cyclical mecha
nism through which markets adjusted by the system's law of motion"

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462 SCIENCE & SOCIETY

(Howard and King, 2002, 333). I

to long-term equilibrium lies m
capital and the falling rate of pr
determine the tendency of cap
gility of the equilibrium itself.
A paradox arises from these i
highlight the lack of a systema
reveal, at the same time, the w
referring mainly to some impo
ties. In fact, the word "crises" is
cyclical issue, as well as to the h
crises are not real crises from
the way in which the system u
contrary, determines the end of
will discuss Marxist views on c
economy (intra-systemic crises),
theory of capitalist collapse (int

Fundamental Contradictions of
vs. Conjunctural Circumstance

Marx based his crisis thesis o

dialectical contradictions inhere
rather than accidental or fortu
only way to understand capita
dialectical contradictions which
possible to evaluate their signif
temporary crises.
To fully grasp the mechanism
proposed a method based on th
rules and mechanisms of excha
previous classical approaches. If
was the outcome of a "propensity
and exchange one thing for an
tained that it was the relation
determined the entire characte
1894, part 7, ch. 51).
According to Marx, both the
and exploitation are basic mecha

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 PERIODIC CRISES IN CAPITALISM 463

stage; it becomes necessary to examine t

understand crises in capitalist economie
isolation would prevent a full compre
(Easterling, 2003).
Marx denied that capitalist relations belo
of things. He argued instead that capitalist
determined form of social production in
ch. 48). The nature and causes of crises a
human behavior; they depend on the co
capitalist system.
The most important dialectical contradic
is therefore to be found in the productio
ing the social character of production an
of profits. At a higher level of abstraction
the contradictions between the develop
and capitalist relations of production. Ca
towards the best possible development of
the other forestalls those forces through i
and property relationships. A crisis sets
tion and the productive forces are in opp
crisis restores the conditions for the acc
1894) and profit by means of destructio
forces: a rise in unemployment, a fall in w
and concentration and a fall in the valu
raw materials all join together to improve
Even though the mode of production and
main concerns of Marx's materialist ana
sions to Marx's work (Howard and King,
damental if his ideas about crises in capi
For example, in the Grundrisse, he treat
analysis in its own right, and provides an
which market activities are the major focu
the mechanisms of exchange becomes f
the transformations at the very origins of
here to the transition from relations of pe
of personal independence. At the same tim
periodic crises in market economies, he
of exchange, developing a theory of cyclic
situations in market relations, rejecting bo

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464 SCIENCE (fs5 SOCIETY

theory of money, arguing that fina

and plays a more active role in the s
exchange which veils the real econom
Focusing both on production and
tion of crises is based on what he considers to be the anarchic charac
teristics underpinning the capitalist system, which is unable to resolve
its dialectical contradictions except through a crisis. The anarchy
of production entails lack of coordination between the individual
capitalist's behavior and that of others, so that competition produces
problems regarding general accumulation. According to Hilferding
(1910), in Marx's view the real limit of the capitalist mode of pro
duction is capital itself, due to the fact that its purpose is to increase
its own value rather than to develop a society of producers. It seems
appropriate to conceive all forms of crisis as structural, since they are
determined by systemic conditions of reproduction (Howard and
King, 2002, 345).
In this light, certain theoretical issues in Marx's philosophy may
well prove to be fundamental for the comprehension of the inner
contradictions that form the origins of crises in the capitalist system.
The first is Marx's law of value, according to which there are two forms
of repeated economic disruptions under capitalism: those spawned
by the inability to extract sufficient surplus value and those stemming
from the inability to realize it (Easterling, 2003). Both forms spring
from the general contradiction between the social character of produc
tion and the private appropriation of profits, although their symptoms
differ: while the latter (anarchy of the system) results in overproduction,
the former causes the tendency of the profit rate to fall (each of these in
turn will be taken up in the following sections).
According to Marx, the general consequence of capitalism's inner
contradictions, in terms of inability to realize or to extract surplus
value, is the boom-recession "economic cycle" ("industrial cycle," in
his texts). This represents a typical trend along the oscillatory growth
path of capitalism and is the basic Marxist explanation for the repeti
tiveness of periodic crises in a market economy.
It is important to remember the general meaning of the eco
nomic cycle in the Marxist perspective. For Marx, crises are not only
periodic — a phase in a cyclical mechanism — but actually represent
what Schumpeter might term a good cold douche (Heilbroner, 1996) in
the process of creative destruction (Schumpeter, 1942). In other words,

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 PERIODIC CRISES IN CAPITALISM 465

Marx identifies periodic crises with the mech

the main long-term tendency works, i.e., con
ization, and the subsequent creation of more
organization (Howard and King, 2002, 333-33

Causes and Consequences of Periodic Crises

Although he did not leave a complete crisis th

a complex, but in my opinion unitary, idea of th
in capitalism, attributing these to the contrad
talist system. Marxist scholars, in the last 150 y
ably have focused on one or another aspect, s
underconsumption, disproportionality, falling
strength of labor and even financially drive
point is to find possible syntheses of all these
provide a superior explanation for periodic cr

Realization and Effective Demand

Marx points to the inability to realize surpl

most important causes behind periodic crises
Overproduction results in an inability to conv
money and thus accumulate capital: too much
capitalists to sell at a profit. The origin of this p
lies in the capitalist drive for accumulation. In

Since the aim of capital is not to minister to certa

profit... a rift must continually ensue between th
consumption under capitalism and a production
exceed this immanent barrier. (Marx, 1894, part 3

The excessive production of goods, in his view

rence but a consequence of the inner contrad
and the built-in tendency of production to ou
erling, 2003). It is not what people need, but w
to buy that is overproduced. As Marx himself pu
not inherent to production generally, but to
capital" (Marx, 1973, ch. 8). In other words,
ate a permanent paying demand, causing Say

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466 SCIENCE & SOCIETY

The collapse of Say's Law can

capital overproduction, i.e., whe
surplus value) but refuse to buy
but do not spend it.
Overproduction (of goods and
to the dual nature of commodit
crisis is the consequence of the i
(Marx, 1867, part 1, ch. 3) of com
(Marx, 1973, II, ch. 17). In other
purchasing and selling being sep
At this point, the contradictory
from being a measure of value, i
1867, part 1, ch. 3). In addition t
exchange, money becomes the u
wealth and means of payment. M
held from circulation as a reserv
therefore, lies in the very natur
Marx explains how probability
sumption is restricted due to th
value (Marx, 1973, II, ch. 17), res
from the capitalist everything t
death, the overproduction appro
of underconsumption by many p
The theory of underconsumption
of the working class to buy back th
the past 150 years, the concept o
several reformulations, the most c
the ultimate regulator of overa
theory at odds with Say's Law.
The underconsumption approac
Marxist debate, as can be seen, f
and Rosa Luxemburg's contrad
Baranowsky (and also Hilferding
from consumption; it is the anarch
consumption which determines
of thought, if the anarchic elem
ning would eliminate them (Jac
approach, known as disproportio
the anarchy of production — sp

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 PERIODIC CRISES IN CAPITALISM 467

its departments — as responsible for the per

systems. For example, raw materials produced i
as industrial production expands might lead
another explanation might be sought in the
two great departments of production, the first
of production (Marx's Department I) and
consumer goods (Department II). These theo
anarchy of the market, but claim that crises ca
political intervention.
On the other hand, Rosa Luxemburg's sta
tion is based on the notion that expanded repro
possible but socially impossible (Jacoby, 1975
trend of capitalist accumulation can be expl
presence offerees that are external to pure cap
1978, 228). The answer to the demand gap q
due to its control of important sources of ef
After the 1929 crisis, an important Marx-o
underconsumption theory was attempted by
approach (Sweezy, 1942), in which he adopts
sumptionist view, Sweezy argues that capitalism
to expand production capacity faster than cons
laterworks, togetherwith Paul Baran, he argues
tends to enlarge the entirety of its productive
comprehensive range of its means of product
nally generated effective demand, so that, in
factors, "monopoly capitalism would sink deepe
of chronic depression" (Baran and Sweezy, 1968
1978, 223) due to its inherently stagnant nat
basically endorsed a Kaleckian model of overi

It is true that investment by capitalists is the gene

But it is equally true that investment tends to prod
of capital, which in turn leads to recurrent cris
1983, 3, quoted in Howard and King, 1990, 270.)

The "Law " of the Falling Profit Rate

This law probably represents one of the mos

in Marx's work. The aim of this section is to

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468 SCIENCE & SOCIETY

of this issue in connection with h

is not my objective here to tackl
inter-systemic) crises of capitalism
debate surrounding the suppose
materialism the la (the necessity of
or not Marx's views on the rate of
the cyclical crises of capitalism.
Marx links the decline of the rat
in the "organic composition of
this mechanism as "an expressio
production" (Marx, 1894, part 3
this as a tendency rather than a
possible countervailing tendenci
the increase in the rate of explo
depression of real wages, the lo
value, over-population and foreig
In terms of periodic crises, this
seen as one of the causes which,
together with the other counterva
tions of the market. In other wor
the other factors, produces the c
nism, the periodic crisis itself p
the rate of profit.
The phenomena involved in a
profit might not be identified w
ing difficulties for capitalist rep
according to Marx, the falling ra
capacity for regenerating the fo
bility of increasing investments
larger scale. Moreover, the declin
view, a cause of overproduction wh
overcome the incapacity of extr
ists try to push wages down. In ot
of profit reveals, once more, th
by the inability to either extract

1 Here I introduce the issue of the falling r

FRP discussion has since been cast in term
impossible to summarize in this article.

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 PERIODIC CRISES IN CAPITALISM 469

Discussions about the law of the falling rate

into two sub-theories which explain period
a) a rise in the organic composition of cap
rate of profit; or b) a decline in the rate o
the fall in unemployment that occurs duri
The first major Marxist to shift the debate
underconsumption and disproportionality
who emphasized the centrality of the law of
In his analysis, as the rate of profit falls, the
of profit also slows down and eventually c
investments no longer generate additional p
and a crisis breaks out (Shaikh, 1978, 236)
Paul Mattick (1974) elaborated on Grossm
tained that, from a Marxist point of view,
sumption and overproduction can only de
of the capitalist crisis mechanism. Accordin
rate of profit is alone able to describe the h
capitalist mode of production and, as a con
Mattick, the problem of realization (the an
"overproduction" belong to the realm of ap
inability to extract enough surplus value —
of profit to fall — which constitutes the real
At the beginning of the 1970s, Andrew
introduced a new interpretation of the rel
crisis theories. Their profit squeeze theories a
for a decline in the profit rate and the ensui
and falling unemployment (Glyn and Sutc
the role of the class struggle and union m
the profit share. The principal hypothesis is
of labor (RSL): "The capitalist process of ac
the balance of political-economic power be
in such a way as to enable the working class t
of national income" (Weisskopf, 1979, 345
In particular, Thomas E. Weisskopf highlig
tions advanced by RSL theorists:

First, an increase in working class power enab

successfully for higher wages and thereby to incr
money wages. Second, an increase in working

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470 SCIENCE & SOCIETY

to resist more successfully capitalist

increased discipline, speed-ups, and
labour efficiency units per hour of wo
growth of productivity. Third, the ris
or later result from accelerating wage
not be offset by a corresponding incre
the share of wages will rise. (Weissk

A similar theme becomes increasi

Ernest Mandel, who identifies a
curve in the origin of disruptio
1980). In particular, Mandel high
jective factors such as the class s
paths (Howard and King, 1990, 2

Financially-Driven Periodic Crise

with Marxist Approaches

Marx describes credit as one of

by capitalism to overcome its ow
tion can surpass these limits by r
part 7, ch. 23). At the same time
placing at the producer's disposal
in the system (Marx, 1894, part 5,
of the reproduction process rests
occur — a tremendous rush for me
denly ceases and only cash payme
5, ch. 30). Marx therefore define
rush for means of payment brou
credit (Wolfson, 1994, 15).
Credit becomes an important
of crises in general — when it pu
consumption limit. Marx explains
payment, falling prices or a loss
available but cannot operate an
1867, part 7, ch. 23). This situation
an ensuing credit and monetary
which hides the reality behind ov
of realizing surplus value. A cris

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 PERIODIC CRISES IN CAPITALISM 471

of exogenous (speculation) rather than en

tion) causes.
During a crisis, the dearth of money seems to
sequence of the loss of credit, whereas it actuall
ruption of the metamorphosis, commoditie
which causes the saving-hoarding phenomen
commodity devalorization (Marx, 1894, part
As Steve Keen (2001) explains, it is uncontrove
proposed a descriptive overview of financially dr
cially in the third volume of Capital. In Marx's a
leads to the money supply growing faster than
expansion in credit. This easy credit produces ris
rates, and, again, the credit itself acts as a lever
The foregoing discussion highlights the m
driven periodic crises in a Marxist perspectiv
porting weak demand, easy credit acts as a ba
the profit rate due to underconsumption. Even
or delays in the payments of the debts prov
the metamorphosis, and the related loss of
crisis emerges as a speculative or financial on
ity of overproduction and the impossibility of
For Marx the accumulation of easy credit/priv
an essential element that gives rise to a depress
consequence of what happens in the real econom
an article in the New York Daily Tribune, Marx a
speculation and credit abuse are the origins of cr
these problems are the result of overproduction
acceleration of the crisis itself. The problem, h
the symptoms first (speculation and credit a
(overproduction), and so they confuse one with
This does not mean that Marx was not awa
speculation. Many of his articles are dedicat
of the fever of speculation, which "has spr
proletariat.. . . Stock-exchange speculation h
industrial development, or rather, industrial ac
for speculation" (Marx, 1856a, quoted in B
sage, written in 1856, could be used to descri
financialization and shows Marx's awareness o
highlights the continuity in the system: financ

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472 SCIENCE & SOCIETY

that is "the same as it was befor

Marx identifies the rising over-f
system, but he always describes
accelerator of the timing of the cr
crisis itself (Bologna, 1973).
At the same time, Marx maintains that a crisis also causes the
destruction of capital, necessary for the restoration of capital accumu
lation. He identifies two kinds of capital destruction resulting from
overproduction and a decrease in credit (Marx, 1973, ch. 17, quoted
in Giacchè, 2009, 44).
On the one hand, there is a drop in the price of commodities,
which does not represent a real loss of capital but a transfer of wealth
from old capitalists, who must sell goods and services below their value,
to new capitalists. This process defines a new equilibrium. On the
other hand, the paralysis of equipment, machinery, raw materials and
workers destroys real capital, with a consequential loss of production,
unemployment, a bigger reserve army of laborers and new relation
ships in the labor markets.
It is noteworthy that Marx considers the destruction of real capi
tal not as a consequence of exogenous causes but as an endogenous
condition for the self-preservation of capitalism. Unemployment,
bankruptcy, wage falls and general impoverishment are natural reac
tions, or even antibodies, he may have said, in the economic system,
which act as a passage towards a new equilibrium based on new pro
tagonists in capital accumulation.

Periodic Crises "of Our Time" and Marxist Theories

Mainstream interpretations hold that the present crisis originated

in the financial/speculative sphere due to extremely high levels of
debt, rampant speculation, permissive monetary policies, the loo
sening of the rules regarding borrowing and lending as a result of
deregulation, etc. (Carchedi, 2009). Ozgur Orhangazi (2011) has
recently noted that

the emphasis is on the deregulation of finance and the financial part is

depicted as a negative force impinging on the real economy. Some argu
ments portrayed finance as damaging the real side of the economy and put
the blame on lack of regulation {e.g., Kregel, 2007, 2008; Krugman, 2009;

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 PERIODIC CRISES IN CAPITALISM 473

Whalen, 2007; Wray, 2007,2009). In its very general f

deregulation to the rise of rentier, financial fragilit
mistakes or misguided policies led to the uncontro
and speculation and ineffective regulation coupled
led to markets getting out of control. (Orhangazi

In this perspective, the present upheaval is co

come of mistakes in policy-making or overfin
Keynesian authors, following Minsky's ideas,
finance to be re-regulated, because "it is time to f
in its proper place as a tool to achieving sustainab
2011,12). These approaches focus on what is diff
the present crisis, by introducing new conceptua
phases, such as "money manager capitalism" —
characterized by highly leveraged funds seeking
an environment that systematically underprices

Markets generate perverse incentives for excess risk

low returns [so that] the entire financial system
that made it — an economic collapse and debt defl
practices had been permitted by regulators, and en
incentives. (Wray, 2011, 7-8.)

Mainstream interpretations of the current disru

as a financial crisis which is infecting the real ec
of over-financialization. Interestingly, this echo
ported in Marx's time that speculation and credi
for this kind of disruption (Marx, 1858). Accord
2009,40-41 ), credit allows consumption to surpa
intensification of the reproductive process (Mar
credit pushes production to overcome its own li
thus masks the pre-existing problems of overpr
seems to be a financial outcome; the credit bubb
of overproduction, and when the bubble bursts,
of being itself the cause of the crisis (Giacch
happens, according to Minsky, it detonates a d
the crisis due to the deflationary spiral of deval
the stock market (Minsky, 1993). The process of
morphosis) of commodities into money and b
interrupted, with the emergence of the saving-

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474 SCIENCE & SOCIETY

linked to commodity devalorizati

1894, part 5, ch. 32). The Keynesian
point (Giacchè, 2009, 43).
From the perspective of describin
one, according to both public o
research (neoclassical or Keynesia
practices are considered to be respo
22) : investments in subprime loans
bonds and swaps; short-term inve
the shadow banking system; the im
conduct of the highest-rating com
the banking system; failures in r
in the USA and oversaving in Ch
the deficit in regulation and cont
From the perspective of this arti
of the most frequently alleged c
Marxist point of view. Regarding b
speculative behavior, for example
that they are rebuked for their an
mainstream neoliberal perspective
their very strength (Siemons, 20
other words, in a crisis situation, th
the Financial Times invokes a "les
quoted in Giacchè, 2009, 17). The
perspective, is that both avidity
features of capitalism, a natural be
that aims for maximum profits
as much as possible. Marxists con
be a manifestation of the system
Mainstream views regarding th
oriented towards exogenous facto
present in the spheres of finance
search for an external culprit, a
blame for the disruptions to the sy

Marxist Approaches to Periodic Cr

My interest in Marxist crisis th

concerning the weakness of main

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 PERIODIC CRISES IN CAPITALISM 475

deficient in their analysis of production and,

very nature of capitalism. However, this kind
in heterodox literature (Carchedi, 2009), but
is often irrelevant. This deficiency contribu
points of view being miscomprehended or ev
reasons I think it is useful to look at Marxis
to create the possibility to provide a superio
current crisis. The point is: what Marxist cu
sued? My answer is that we should look at a c
structural crisis theories.

In fact, I have some doubts about considering different Marxist

crisis theories solely as competing alternatives. More than twenty
years ago, Thomas E. Weisskopf already noted that in Marx's own
thinking they were dynamically inter-related, but he referred only
to theories concerning the real economy, such as overproduction,
underconsumption, the falling profit rate and the rising strength of
labor (Weisskopf, 1979, 348; Alcaly, 1978; Laibman, 1979).
In my opinion, the apparently unsolvable dualism real economy/
fmancialization also comes from the tendency to take a single aspect
of Marxist theory, such as money or credit, and isolate it. On the
contrary, in Marx's perspective, finance is an aspect of the capitalist
mode of production and its role is explained within the framework
of the theory of surplus value. Moreover, the undervaluation of
Marxist approaches to periodic crises and financial issues is also a
consequence of a theoretical misunderstanding that affects even
many "heterodox" economists. In fact, as John Weeks (2011) has
highlighted, despite his relatively great influence on progressive
thought and practice in other areas, Marx's monetary theory has
had relatively little impact:

In the countless books in the Marxian tradition on economic crises finance and
money have minor roles. The lack of influence of Marx's theory of money is
largely explained by a belief that his views were either wrong or an anachronism
because of their emphasis on commodity money. However, commodity money
is an essentia] element in the labor theory of value. When placed in the context
of the circulation of capital, commodity money is a powerful tool to explain
the role of money itself and the nature of financial capital. (Weeks, 2011.)

The theme of the relationship between crises and money is not

neglected, but it is a central issue of many of Marx's articles, a point

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476 SCIENCE 6s SOCIETY

which reveals his placement of th

capitalist development (Bologna,
For example, on October 27, 18
panic, Marx claimed that it was
between the disposable capital an
commercial and speculative enter
he removes the blame from the s
and money as a means of paymen
the relationship between money
accumulation and the system of
argues, did nothing to stop the
tion between the capital markets
forestalled measures aimed at isolat
became widespread (Bologna, 19
However, the reality is that for a
some important exceptions such
the role of finance and placed th
of their analysis (Orhangazi, 201
some Marxist scholars have shown a renewed interest in the role of
finance. For example, Crotty (1986), and Itoh and Lapavitsas (1999),
go beyond the idea of finance as something external. In particular,
Lapavitsas (2010, 17) notes that "causation between real accumula
tion and finance runs in both directions, even if the former sets the
parameters for the latter."
New and meaningful Marxist approaches are thus emerging.
Finance is no longer an expression of the superstructure, but is recog
nized as an internal feature of capitalist production, with a dialectical
relationship to the real economy. For instance, Orhangazi, even if he
seems to limit the internal role of finance to a specific type/period
of capitalist economy (the neoliberal era), writes:

In Marxian theory finance plays a complex and contradictory role. Finance's

role long ago went beyond supporting the real economy but became a central
one in shaping it while at the same time being shaped by it. In the neoliberal
era, the relationship between the financial and the real sides of the economy
became more complicated. A common critique advanced in the aftermath
of the financial crisis focused on the damage of unregulated finance on the
real economy. However, approaches that take finance as something exter
nal that impinges on the real economy or as a sphere that grew simply as
a response to the problems in the real side of the economy are potentially

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 PERIODIC CRISES IN CAPITALISM 477

limiting our efforts to understand contemporar

path(s). (Orhangazi, 2011, 143.)

Bellofiore's recent attempt to integrate the diff

crisis theory into a unitary discourse seems t

The fundamental causes behind the Great Recess

or just real. It does not consist either in low wages,
consists much more in the interaction between rest
of extraction of surplus-value, on the one hand, and
of labor within financial capital, on the other. (B

Attempts to explain finance, and financializ

teristics of capitalism are coherent applications
non-deterministic approach. Financialization
are financial crises. They are both structural el
form of production called capitalism.
I believe, therefore, that it is possible to look
or at least a juxtaposition, of Marx's and Mar
A promising starting point may be found i
rized above, on the "law" of the falling pro
tions with overproduction and rising streng
A possible solution has been provided by
FRP law as a sort of meta-theory of crisis, w
not only overproduction/underconsumpt
tionality approach to realization crisis, but a
that originates directly in the social relation
the immediate process of valorization (Be
capacity of Bellofiore's approach to synthes
theories of crisis is still debatable, but it is
ing the falling-profit-rate conundrums by sa
really the juxtaposition, although not yet the
approaches. Moreover, as I have maintained
sumption and overproduction of commodit
time by easy credit and finance in order to
of the rate of profit, but sooner or later a l
ficiency of effective demand arises. This ex
appear in the first instance as financial, and
the second instance as real crises.

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478 SCIENCE & SOCIETY

Do Marxist Crisis Theories Help

the Crises of Our Time ?

Facing the present global crisis

spectives might provide us with
situation. The point is to compar
tendencies with the Marxist crisis
pursue this goal, I have focused
in the United States, in order to
Marxist approaches and categori
matic synthesis of this effort.
The main question concerns th
endogenous aspect of capitalis
arbitrary disruption of the syste
the mainstream interpretations
nating in the speculative sphere
real economy. I refer here to th
as the origin of the crisis (Trid
the two-step theories of a financia
real economy (Greenspan, 2007)
a different history. Tridico (20
the financial crisis by highlight
tion and the decline of the wage
consumption and effective dema
and Saraceno, 2010).
The data on income distribution or real wage tendencies highlight
how the decades preceding the crisis were characterized by longer
term dynamics driven by growing inequality (Rajan, 2010). For exam
ple, in the USA the period since the 1970s has been characterized
by stagnant or declining real wages. Moreover, real wages remained
well below the increases in productivity and the gap between pro
ductivity and wages began widening in the 1990s (Orhangazi, 2011,
130-132). Aggregate demand, household consumption in particular,
were restricted by the decline in real earnings (Bellofiore and Halevi,
2010; Goldstein, 2009; Orhangazi, 2011).
Many scholars have connected the acceleration in financializa
tion with increasing income inequality (Kumhof and Ranciere, 2010;
Orhangazi, 2011). They highlight two aspects. First, the increase in
additional demand for credit to sustain living standards of the lower

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 PERIODIC CRISES IN CAPITALISM 479

and middle class. Second, the additional suppl

extra income of the top income group lookin
Accelerated financialization, measured as m
especially in the USA but even in Europe, star
Reagan's and Thatcher's policies, and has been
with inequality and labor flexibility. Tridico s

A negative interaction between labour, finance, consu

took place, creating a model where finance is the ma
acterised by multibubbles and consequent bursts; wage
and compressed; consumption is sustained by finance
lacking while portfolio movements and speculation p

From a neo-Keynesian point of view, this syst

ditions for the present crisis because of its own
quantitative easing and cheap money, mortg
boom, Ponzi financial schemes and Minskyan
natural consequences of this economic model
This approach comes from Minsky's framew
sky's interpretation of financial crises is base
ing expectations that become less favorable th
(Wray, 2011). He describes passage from the "
which it is possible to meet payment commitme
income, to a "speculative" position from which b
interest, and finally to the Ponzi position, accor
must be capitalized. In this situation, banks stop
outstanding debt continues to grow or, mor
changing expectations; investors collapse and b
tors. The result is uncertainty and pessimism
investments, income and consumption (Wray
Minsky's work highlights the differences tha
ries of periodic crises and neo-Keynesian appr
focus on the weaknesses of mainstream interp
idea of periodic crises as a structural feature
can not be translated into a characteristic of
of capitalist economy. On the contrary, Marx
structural explanations that help us to have a
For example, the description of the present
of overproduction and decreasing credit seems

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480 SCIENCE àf SOCIETY

capital destruction (Giacchè, 2009,

a drop in the price of commoditie
but simply a transfer of wealth from
and services under their value to ne
a new balance. On the other hand, th
as equipment, machinery, raw mat
As a result, a loss of production, un
of labor and new relationships in t
of capital collapse, as described by
current crisis as the diminishing va
and rising unemployment levels w
An important Marx-oriented reviv
is attempted by David Harvey (2010)
a structural and endogenous event. I
he describes financialization as a
demand and as a tool to support p
bubbles that burst in 2007 and 200
speculations or immoral behaviors,
to a Ponzi process; they were the m
barrier to capital accumulation.
Marxist structuralist approaches t
vey's, have also been forced to fa
Choonara highlights a dividing lin

Some emphasize the internal logic of

financial crisis as impinging upon the
ers, while recognizing the importance o
the underlying problems in the "real"
finance and paved the way for the cr

Choonara argues that

the real questions at stake are whether

autonomous from the non-financial a
rent crisis is a new type of crisis or is
even if the crisis is deferred and given
of finance; and whether the dynamic of
changed by a process of "financialisa

For instance, Marxist authors such

Gowan (2009) highlight the existen

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 PERIODIC CRISES IN CAPITALISM 481

capitalism and emphasize the role played by

"financialization" at the origin of the present
Other scholars, however, are critical of the noti
a crisis of financialization: for instance, And
Robert Brenner (2009) argue that the current
a long-term failure of capitalism to shrug off p
that emerged from the 1970s (Choonara, 200
are provided by Foster and Magdoff (2009, 1
"slowdown or stagnation has now persisted fo
Callinicos (2010, 50) who has described the la
of "long-term crisis of overaccumulation and p
To summarize these positions, Orhangazi has
that

a number of Marxian authors, writing against the ex

problems, presented the rise of the finance and the
product of the problems in the real economy. While
of this argument, broadly they share the view that th
and hence the crisis must be found in production

These ideas are similar to Arrighi's (1994) arg

financialization largely occurring as a respon
profitable investment opportunities in the real s
competition in product markets. Financializa
counterbalance the fall of profitability.
All of this supports the theoretical importa
tion that, in a capitalist economy, the death o
of boom-recession is an impossibility. Crises, h
considered as a pathology of the market syste
come of the way it works. The entire Marxist ap
and future periodic crises — based on over
sumption, the falling rate of profit, profit sque
etc. — thus offers an alternative to both the n
and to neo-Keynesian approaches.

Faculty of Arts and Social Sciences

Kingston University
Penrhyn Road
Kingston upon Thames
Surrey KT1 2EE, UK
ste. agnoletto@gmail. com

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 482 SCIENCE àf SOCIETY

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