An Introductory Explanation of Capitalist Economic Crises

Chapter V: The Industrial Cycle Has Split in Two!

(Last update to Chapter V: 10/13/08)


5.1   Outlining the theory.

      It is now time for me to outline my own theory of the changes in capitalist economic crises in the imperialist era, a theory which includes both short-term industrial cycles and also long-term industrial cycles. In my view both of these cycles today are the continuation of what was once a single cycle (called by Marx the “industrial cycle”).

      It is not that there “always were” two cycles (as Kondratiev and others thought), stretching back even to the early 19th century or before. Instead, up until the imperialist era there was only one true industrial cycle, usually with a period of 5 to 10 years, though of course there were also non-cyclic longer periods of generally better or generally worse economic performance. Those longer periods were in fact themselves mostly an outgrowth of capitalism and the social conditions it led to, including wars and revolutions. But these sorts of phenomena—though they were aspects of capitalist society—were not themselves directly tied to the industrial cycle, nor were they really cyclic themselves with any sort of internal regulating mechanism that led to a cycle (let alone to a cycle with a constant period).

      But it is also not my view that a totally new and different cycle, with a totally new regulating mechanism and a longer period, has developed in the imperialist era “in addition to” the old short-term cycle. Rather, I claim that the old short-term cycle has itself split in two forming two cycles with different periods. I will try to clarify how this is possible as we proceed.

      Chapter I covered the “basic contradictions underlying capitalist economic crises” and the second chapter covered the “surface layer” of contradictions. As a first rough approximation, we may think of things this way: Before the era of capitalist imperialism the confluence of the “basic contradictions” and “surface contradictions” together coming to a head brought about the crisis phase of the standard (5 or 10 year) industrial cycle. Over time these crises got more intense, but kept to their roughly same period because all the contradictions building up came to a head and got resolved at more or less the same time. But now, in the imperialist era, when only the “surface contradictions” come to a head we have a (comparatively mild) recession, and when—less frequently—both the “surface contradictions”  together with the “basic contradictions” come to a head we have a longer term and much more serious economic crisis, appropriately now called by the different, older name, a depression.

      However, that’s just a rough picture. It would not be correct to say that only the surface contradictions drive the short-term cycles whereas both the basic and surface contradictions drive the long-term cycles. Actually, both short and long cycles in the imperialist era are driven by a combination of both “basic” and “surface” contradictions. And it is the same fundamental contradiction, that between the restricted consumption of the masses under capitalism and the tendency of the capitalists to keep expanding production without limit, which now leads sometimes just to mild recessions, and—eventually—to a full-scale and very severe depression.

      In an earlier essay I summarized this theory as follows:


      My own view might be considered a variation on the short-waves/long-waves theme: Due mostly to government intervention in (and attempted regulation of) the capitalist economy, the old pre-imperialist sort of business cycle has split in two, and now consists of short cycles and long cycles. Of the two types, the longer cycle is the principal descendent of the pre-imperialist cycle, since it involves the complete working out of all the same internal contradictions of capitalist production. The short cycles are really “short-circuited” cycles, wherein the government is able to successfully interrupt the developing chain of contradictions before they get totally out of hand. Only those contradictions nearest to the surface come to a head, and they cause only relatively mild recessions. But as time goes on, the underlying contradictions build up to the point where they can no longer be forestalled by any government action. At this point one of the recessions proves to be uncontrollable, and develops into a far more serious situation—an intractable period of depression and stagnation. The basic cause of such a depression is the massive overproduction of capital which has been building up all along, and the only way to get out of it is through the similarly massive destruction of this “excess” capital. In the imperialist era, the forces of production are so great, and the resulting overproduction of capital so enormous, that only the horribly destructive force of inter-imperialist world war is sufficient to clear the ground again and allow the whole process to start afresh. Until such a hyper-destructive war breaks out, the depression/stagnation phase of the long cycle will continue more or less unabated—though there may be some further, very secondary ups-and-downs within it.1


      As indicated there, I attribute this splitting in two of the industrial cycle primarily to government actions to control the economy, which during the imperialist era have finally become determined enough and effective enough to actually ward off the full development of an overproduction crisis—provided that the basic underlying contradictions have not also come to a head yet.

      What are the kinds of government actions I have in mind here? They are just the sorts of things we talked about in chapter II; that is, utilizing the various methods available to artificially expand the market for the “excess” commodities that are being produced. They can lower interest rates, for example, to make it easier for people to borrow money to buy homes, cars and other things. And if measures like that have already been pushed to their limits (with interest rates being extremely low for example), they can cut taxes or start public works programs or buy big and expensive new weapons for the military. As mentioned in chapter II, the two primary things that they can do are: 1) promote increased consumer debt and 2) build up more government debt (through Keynesian fiscal deficits).

      In other words, to resolve the surface contradictions (for a while!), the government regulators of the capitalist economy can take steps which serve to further develop the underlying contradiction—that the workers are not paid enough to buy back all that they produce. This underlying contradiction is “further developed” by means of ever-increasing debt. And it is correct to say the underlying contradiction is “developed” or “intensified” because debt cannot possibly build up forever and at an ever increasing pace, and therefore it must itself reach a final limit eventually.2 When it finally does reach its limit there is nothing more the capitalist government can possibly do to ward off the economic disaster we now call a depression.

      Still, it is a fact that capitalist governments are now able to forestall this eventual catastrophe a number of times before the methods they use become impossible to continue using. And this is why the economy now goes through a series of short-term business cycles, each culminating in a relatively mild recession, before finally reaching the point where yet another recession cannot be contained and proceeds to develop into a major depression. In this way both the frequent mild recessions and also the quite infrequent—but inevitable—major depressions are both explained by the same theory.

      There is, however, quite a bit more to say about all this. Here are some of the many questions that might be raised which we will have to try to give good answers to:

  1. What is/are the regulating mechanism(s) for the long cycle? Even if the old cycle from pre-monopoly capitalism has been split in two there must still be some differences in the regulating mechanisms for these two cycles today which make them two and not just one. How are the short cycles actually brought under control and ended? Why can’t the longer cycles be ended in the same way?

  2. Marx and Engels said in the Communist Manifesto that the bourgeoisie gets over its periodic economic crises by means which makes future crises worse. Was this really true in the pre-monopoly era? Is it still true for either the short or long cycles in the imperialist era? How does this “splitting in two” of the industrial cycle affect the general trend toward increasing severity of economic crises that Marx and Engels described? Obviously the long cycle crises (depressions) are much worse than the short cycle crises (recessions), but are the recessions themselves getting worse over time (or milder?!), and can we expect the depressions to get worse over time?

  3. Are these longer cycles really “cycles”? Do they have some roughly fixed period (in the way that the shorter cycles seem to have always had a period of roughly 5 to 10 years)? If so, what is that long cycle period? If not, is it really correct to call them “cycles” at all?

  4. Why is it only now, in the imperialist era, that capitalist governments have found a way to “short-circuit” most crises and limit them to fairly shallow recessions? Why couldn’t they have just as well done this back in the pre-monopoly capitalist era?

  5. How many long-term cycles have there been so far in history? How do the economic developments of the past few decades fit into this “split cycle” theory? What does this theory lead us to predict for the short-term and more distant future?

      The fifth set of questions, which will require a lot of space to answer, will be dealt with in Chapters VI through IX. I’ll address the other questions in the next few sections.


5.2   The internal regulating mechanism(s) for the two cycles.

      The first set of questions was about the internal regulating mechanism(s) for the two cycles that now exist in the imperialist era. In my view, as I already hinted, the regulating mechanism for the longer cycle today is in its abstract essence the same as the regulating mechanism of the pre-monopoly industrial cycle, and that long cycle is the primary continuator of the pre-monopoly cycle despite the fact that its period is different. And the reason that this long cycle is the primary continuator of the pre-monopoly cycle is that it also involves the full working out of all the same economic contradictions as in the past.

      However, while the internal regulating mechanism of the long cycle today is in its essentials or when viewed abstractly the same as the mechanism for the pre-monopoly era industrial cycle, there are now some huge differences in how things actually work out in the concrete. Now, as before, the crisis stage of the (now long-term) cycle can only be resolved by the destruction—in one way or another—of the excess capital that has been built up since the beginning of the cycle. So at that level of analysis things are the same. But in the pre-monopoly era crises were mostly left to resolve themselves through a combination of the devaluation (depreciation) and physical destruction of excess capital by the individual capitalist companies themselves. Today, in the crises that develop at the end of the long cycles (i.e., depressions), the private capitalist corporations no longer seem to be able to destroy enough capital, or at least to destroy enough in a sufficiently short time, to resolve such crises. Thus depressions drag on and on, even if there are some smaller ups and downs within them. This was one of the lessons of the Great Depression of the 1930s, and has been verified by the economic history of the “long slowdown” of the past few decades.

      Why are modern corporations unable to straight-away resolve this excess capital problem on their own? There are a variety of things which explain this, and I’ll only briefly sketch out a few of the most important ones here. First, giant corporations in the imperialist era often have enormous reserves and can afford to shut down a number of plants for quite a long time without actually dismantling them, and without themselves going bankrupt. Far more than in the pre-monopoly era, modern corporations can try to wait out the economic crisis, even if it goes on for years. And if demand then does start to pick up a bit, they already have this reserve capital (mothballed factories and machinery) which they can very quickly bring back into service—which blocks much of the investment in new factories that would otherwise occur.

      Secondly, when the reserves of individual corporations are weakened or exhausted, in the imperialist era we typically have truly massive support for “private” corporations by the bourgeois state. Weak corporations are usually boosted through tax breaks and sometimes by other measures such as by special government orders for the things those companies produce. Whole industries and even the entire private economy are granted such favors “when necessary”. (One recent example is that in the period 1998-2005 most U.S. corporations did not pay any Federal taxes! The huge tax credits that were granted to them over this period were some of the major reasons.3)

      Individual corporations, especially if they are viewed as critical for the economy or “too big to fail”, are also bailed out with huge direct infusions of government money. So instead of quickly destroying excess capital, special steps are taken to preserve it—which prevents a powerful new boom from commencing. In extreme cases, companies are “nationalized” for a while, or even whole industries. This has been especially common in Britain and continental Europe. Then after the government pays off the accumulated huge debt for these industries and closes a number of the most unprofitable enterprises, the supposedly “nationalized” companies are sold back to individual capitalists again at a bargain. This nationalization racket has the additional benefit for the bourgeoisie of discrediting “socialism” in the eyes of many (since the collective bourgeois ownership of such depressed industries by the capitalist state is called “socialism” and is constantly championed in the name of “socialism” by social democrats and other revisionists).

      In addition to all that, it is a simple fact that in the imperialist era the productive forces of capitalism have grown so enormously powerful, and the economic and governmental forces promoting and facilitating consumer, business and government debt have grown so strong, that the resulting “overhang” of excess capital that is built up between depressions is simply phenomenal! That stupendous amount of capital simply cannot be quickly destroyed—except possibly by some horrendous outside force. Conceivably this could occur through some unprecedented natural disaster, but it would have to be something far more serious than a few very powerful hurricanes. Possibly a medium-sized asteroid might do the job (assuming it was small enough not to wipe out humanity completely!). But in the absence of such an unlikely external “remedy”, the destruction of sufficient excess capital to create the conditions necessary for a new economic boom seems to be possible only through the mutual action of the major capitalist governments of the world. And not just any sort of action; as I just mentioned, these governments most often actually seek to bail out corporations in danger of collapsing and thus tend to do things which preserve excess capital rather than destroy it. No, it seems there is only one thing that capitalist-imperialist governments are willing and able to do which can truly end depressions—namely, to initiate and carry through massively destructive inter-imperialist world wars. Certainly no capitalist ideologist will ever admit this, or even come to understand this privately. But it is the horrendous truth of the matter.

      This is how it has come to be that the most extreme political actions that human beings are presently capable of, ultra-destructive world wars which kill tens or hundreds of millions of people (and possibly even all of humanity eventually), have come to be part of the “regulating mechanism” of the long-term capitalist economic cycle in the imperialist era. I would imagine that even many revolutionaries and Marxists might have a hard time coming to recognize and accept this horrible truth about capitalism. If you think that my analysis of this matter is “over the top”, or otherwise unreasonable, then just reserve your own opinion for now. (Some facts are just so shocking to people when they first confront them that it takes some considerable period of time to come to accept that they actually are facts.)

      Of course it is possible, and today even quite likely (fortunately!), that such a hyper-destructive inter-imperialist war might not occur for a very long period of time (several decades even), and therefore all the excess capital which has been built up over a long period of “good times” might not be soon destroyed in a new inter-imperialist war. In that case the depression phase of the long-term capitalist economic cycle will just drag on and on indefinitely (or else until people have had enough of capitalism and finally decide to get rid of it once and for all). Even during the Great Depression of the 1930s, which was a period especially primed for a new inter-imperialist war, it took a decade for that to develop in Europe. For reasons I will get into in Chapter IX, I expect it to take much longer than that for the next depression to lead to all-out inter-imperialist war, and therefore the next depression will last much longer than that of the 1930s.

      But aren’t there other measures besides the massive destruction of capital (through war or otherwise) that could bring the economy “out of” a depression? The answer is “yes and no”, depending upon what we really mean here by bringing the economy out of a depression. As we will discuss in Chapter VI, some countries (e.g., Germany and Sweden) did manage to suspend the Great Depression of the 1930s, and other major capitalist countries (including the U.S.) were at least able to partially mitigate the Depression, through public works programs and Keynesian deficit spending. But these were measures that 1) could work only because they hadn’t previously been pushed to their final limits, and 2) could only work for a while. So yes, it is possible in some situations to interrupt or mitigate a depression for a while by using the same methods we talked about in Chapter II which (for a while!) prevent recessions from turning into depressions in the first place. But these methods—and Keynesian deficits in particular—can only interrupt or temporarily mitigate, and cannot truly cure or end depressions. If some massively destructive force (like world war) does not soon develop and actually destroy the excess capital that has been built up over time, then the depression will soon resume.

      My conclusion, therefore, is still that only the massive destruction of capital can truly end the depression which develops at the end of the long-term economic cycle. Any mere interruptions or easings of that depression through Keynesian or other means will only be temporary and will merely contribute to the ups and downs we certainly expect within such depressions. And it is my thesis that hyper-destructive inter-imperialist world wars are thus now part of the controlling mechanism of the long economic cycle, since they have become in practice necessary to end such cycles. As I mentioned in section 4.1, the pre-monopoly era industrial cycle was primarily an economic cycle, but the long-term cycle today is more of a political-economic cycle.4 And since inter-imperialist war represents the highest concentration of political contradictions it is not at all surprising that such wars have now become the concluding episode in these long-term political-economic cycles.

*       *       *

      The short cycle today, despite the fact that it has the same period as the pre-monopoly cycle, is not the primary continuator of the pre-monopoly cycle because not all the same contradictions as before come to a head, and—in particular—the primary contradiction, that the workers are not paid enough to buy back all that they produce (or in other words the contradiction between the restricted consumption of the masses and the compulsion of the capitalists to keep expanding production without limit), does not come to a head in the crisis period of the short cycles and does not get resolved.

      The short cycles today have more or less the same period as the pre-monopoly cycles because the surface contradictions leading up to their initiation are the same. Once they begin they usually get contained and resolved in a relatively short period of time by government interventions which resolve those surface contradictions by means which further aggravate the underlying basic contradictions (and especially the primary underlying contradiction)—but which still do not allow those underlying basic contradictions to themselves come to a head. So the governing mechanism for the short cycles is now still pretty much the same as with pre-monopoly era cycles as far as their initiation goes, but is somewhat different as far as how they get resolved. The best way to think about this, as I suggested earlier, is that short cycles are now interrupted cycles, or short-circuited cycles.

      That’s the basic situation with regard to the internal regulation of modern short cycles, but I think it is also fair to say that in recent decades governments have become more “proactive” in dealing with the economy, and in some cases this has probably allowed them to prolong the periods of prosperity within the short cycle. Even Japan, which now (in 2008) is once again entering a recession, seems to have just finished up its longest period between recessions since World War II after having been in and out of recession for the whole period from 1989 to 2001. Governments have also sometimes been able to mitigate and sometimes postpone the advent of a developing recession by very quick action. One example of this was the big tax rebates granted to U.S. taxpayers in the spring of 2008 before it was even certain that a recession was developing. This may have helped postpone the start of the current recession by several months, or else mitigated its early stages.

      The related question raised at the end of section 5.1 is: How are the short cycles actually brought under control and ended, and why can’t the longer cycles be controlled and ended in the same way? I think I have already more or less answered this, but in a nutshell the crisis periods of the short cycles (recessions) are ended by aggravating the factors that will eventual bring the long cycle into its crisis stage (a depression). By stimulating the economy by building up consumer and government debt the economy is brought out of its immediate recession mess, but only at the expense of the future by bringing a depression that much closer and making it all the harder to deal with when it finally arrives.


5.3   Are the short and long economic cycles worsening over time?

      The second set of questions raised in section 5.1 are about whether it is still true, as Marx and Engels said, that the way crises are resolved leads to “more extensive and more destructive crises” and diminishes “the means whereby crises are prevented”?5 And does this apply to both the modern recessions (at the end of short cycles) and also depressions (at the end of long cycles)? And finally, will these new cycles themselves also continue to worsen over time?

      Of course there always appeared to be a slight inconsistency to what Marx and Engels said there as compared to what they also said in the Manifesto and later about the destruction of capital being the means to resolve crises. If the cause of economic crises is the overproduction of capital itself, then the destruction of capital should in fact end the crisis and allow the process of capitalist accumulation to begin anew just as fresh and powerfully as before! That is, ending a crisis by destroying the excess capital does not lead to more extensive and more destructive crises nor does it diminish the means whereby crises are prevented. But even in the 19th century crises were actually resolved by a combination of the destruction of capital and by other means, and those other means did in fact in the end lead to the negative results that Marx and Engels mentioned. Opening up new markets in foreign lands, for example, did help in the short run, but only by eliminating one unused outlet for capital and commodities that could have been used later. Similarly, the creation of new credit (whether consumer debt or government debt) can help resolve a current crisis, but only by diminishing the amount of debt that can be added later and by leading to a bigger crisis when those new debt bubbles eventually collapse. All the methods we talked about in Chapter II actually began, if only in tentative and limited ways in some cases, back in the pre-monopoly era. So yes, Marx and Engels were right after all to say that the actual means being used to resolve crises did at least partly include methods which would lead to more extensive and more destructive crises later on.

      In one way, quite obviously, the splitting in two of the industrial cycle has very much changed what Marx and Engels said about the tendency of crises to continually worsen. Each short cycle crisis stage (recession) is definitely quite mild compared to each long cycle crisis stage (depression). That is the whole gist of the theory.

      But what about the string of recessions within each long cycle? Do they get progressively worse? Actually, in general they don’t. In fact, as the capitalist government improves its ability to manage the surface contradictions of the economy, these recessions might even get milder for a while. The 10 U.S. recessions since World War II (up through the one in 2001) lasted 10.4 months on average, and real GDP declined an average of about 2% from peak to trough. But the last two of these recessions were comparatively mild, each officially lasting just 8 months, with real GDP falling only 1.3% in the 1990-91 downturn, and—according to official statistics (which, however, lie a lot!)—just 0.4% in the 2001 recession.6

      There is even a tendency for governments to get more and more reckless in their promotion of consumer debt and in their resorts to massive Keynesian deficits, which for a time can make it seem like they really know how to control the economy very well. However, towards the very end of the string of recessions I would guess that as it gets harder and harder to keep each new one from developing into a depression, that these recessions will indeed become generally deeper and definitely more dangerous and worrisome to both the government and the populace.

      And finally, what about the string of depressions over a much longer period of time? Will they get worse and worse? Conceptually this is by no means necessary. If each depression completely wipes out the huge overhang of excess capital that has developed since the previous depression, then the ground should be cleared for a powerful new boom. This might especially be the case if there has been a major world war which wiped out not only the excess capital, but even a large part of the capital that was not truly “excess”.

      But there are factors which complicate this “ideal” situation. One major factor was that the capitalist governments at first (during the first depression, as we use the term today, the Great Depression of the 1930s) didn’t quite know what they were doing yet. Their mismanagement of the Depression showed tremendous ineptness, though much more so in some countries than others. (We’ll get into that in the next chapter.) This definitely made that depression much worse than it had to be (or at least far worse than it had to be that soon!).

      On the other hand, the very fact that the capitalists have become much more skilled at controlling and resolving recessions than they used to be means that they are now able to build up the underlying basic contradictions of capitalist production to a vastly more intense level before they pop. This in turn means that when they finally do pop, it is all the more serious and intractable situation! In fact, if they hadn’t learned these skills of economic management, by now there would have probably been at least one more depression already—which would have then got interrupted for a while by intense Keynesian measures and then resumed, possibly cycling like that several times in a row unless some inter-imperialist war, such as the one that almost happened between U.S. imperialism and the revisionist Soviet Union, resolved the issue through the unparalleled destruction of capital (and quite possibly also of humanity itself).

      I don’t want to steal too much thunder from later parts of this book, but what has actually happened so far is something rather different: There was a post World War II boom after the massive destruction of capital during World War II, and within this overall boom period there were several recessions. But then around 1973 there was a fundamental change. The whole capitalist world economy changed for the worse, and has not recovered to this very day. In fact at the present time there appears to be another “tipping point” in progress into an even worse overall period. There are two ways to look at this: Either this “long slowdown” over the past 35 years is itself the first mild stage of a very prolonged new depression, or else it is the swan song of the last boom. There would have definitely been a new depression commencing in the early 1970s had there not been intense measures to prevent this then, and pretty much constantly since then, to keep it from breaking out (at least in full force). (Those intense measures are, once again, the same that are used to control and cure every recession, but since 1973 the “control” and “cure” has only been very limited and partial!)

      In short, my view is that the next depression, will—at least during its worse period—be much worse, and almost certainly far longer (even if the long slowdown that has already occurred is not counted as part of it), than that of the 1930s. But it will also contain a great many sub-periods and ups and downs, including short term business cycles. But we’ll get into more about all this later on.

      Just briefly I want to raise one final issue here: The possible connection of the “split crisis” theory to what is often called the “breakdown theory”, that is, the theory that capitalist economic crises will get continually worse until they lead to the actual breakdown, or total collapse of capitalism. There have been a number of versions of this theory, some rather superficial or simple-minded, but in the end it may well turn out to be correct.7

      I can see at least two possibilities here about how the “breakdown theory” may yet prove correct. First, the hopeful version (“hopeful”, though even it requires great sacrifices on the part of the masses): If the coming depression (or conceivably a later one, if humanity survives this next one and capitalism still exists) proves to be as intractable as I believe it will be, and if it drags on and on for years and years or even decades and decades, then for this and possibly other reasons (such as the growing environmental crisis) there may be a powerful resurgence in anti-capitalist revolutionary ideas. Even if for a time the capitalists resort to various foolish and/or horribly criminal schemes, such as various forms of fascism, in the end the people might be able to overthrow capitalism worldwide and institute genuine socialism and finally communism. On this hopeful scenario, the masses will resort to revolution to get rid of capitalism before the leading capitalist-imperialist powers start a world war. The economic “breakdown” of capitalism in the form of intractable depression will have been either the main reason, or else one of the major reasons, which brings the people to revolution.

      However, an alternative scenario in which the “breakdown theory” turns out to be correct is also possible. “Imperialism means war”, said Lenin, and if the world capitalist economy really falls into an intractable economic depression the pressures toward inter-imperialist world war—which always exist at some level or other—will over time greatly intensify. While I doubt that the imperialists themselves will ever come to understand that the only way they have to truly resolve depressions in the imperialist era is through world war, they will eventually start to act as if they understood this. They will blame each other for their own economic problems, instead of their common capitalist economic system, and for reasons like this (as well as the fundamental desire of each imperialist superpower to control the whole world) they will eventually go to war despite their own great fear of it. And world war today, with massive numbers of powerful thermonuclear weapons, most likely means the end of humanity. This version of the “breakdown theory” is about the final breakdown of not only capitalism, but also of Homo sapiens as a species.

      We Marxists have always known that if humanity is to have a future it must relatively soon overthrow capitalism everywhere in the world. This basic truth is only further underlined by the probable eventual truth to the “breakdown theory”. In my estimation, humanity’s choices really will come down to this: Get rid of capitalism, or die from it.


5.4   Are these new long cycles really cycles?

      To be appropriately called a “cycle” there must at least be a recurring series of quite similar phenomena or events and some driving mechanism that leads from stage to stage within each iteration of the cycle, and from one iteration to the next, in at least a roughly repeating pattern. In many kinds of cycles (not all!) each iteration of the cycle takes at least roughly the same time, which is called the period of the cycle. For wave-like cycles, the period can be taken to be the usual or average time from one trough to the next, or from one crest to the next.

      One of the common cycles in nature which does not have any fixed period is the carbon cycle in the earth’s ecosystem in which carbon dioxide from the air is fixed by photosynthesis in plants into more complex organic compounds, but then is eventually transformed again into carbon dioxide through decay and other processes (sometimes involving animals). Sometimes carbon is “fixed” in plants and animals for decades or even centuries, and other times the carbon dioxide is returned to its inorganic form in hours or even minutes.

      The “period” of the industrial cycle—even during pre-monopoly capitalism—was never very precise. However, it did usually tend to be from 4 or 5 years (at the low end) to 10 or 12 years (at the high end). Marx sometimes referred to it as the decennial cycle, though more often today it would be appropriate to call it the “5 to 10 year” industrial cycle. The fact that the industrial cycle never really did have a precise period by no means kept it from being appropriately referred to as a cycle.

      It is useful to think for a moment about just why the standard industrial cycle sometimes has a period of 5 years (or less) and sometimes of 10 or 12 years (or perhaps more). No doubt the exact reasons vary with each cycle. But clearly there must be some factors affecting the development of the cycle that affect not only its general development from stage to stage but also the period of the cycle itself. In other words, the industrial cycle (even during the 19th century) was the sort of cycle whose regulating mechanisms could also affect the period of the cycle, sometimes making it longer and sometimes shorter.

      Now that the industrial cycle has split in two in the imperialist era, how has that affected the periods of the standard and long-term cycles? In general the standard cycle has been little affected. Possibly the cycle has sometimes been lengthened a bit in recent decades due to more sophisticated intervention by the Federal Reserve and other parts of the government, but the effect has certainly not been overly pronounced.

      But when it comes to the question of what the “period” of the long-term cycle (or “wave”) is, it is no longer clear that there is much of any definite period here at all. There are several reasons for this, but the biggest one is that the depression stage of the long cycle can continue for enormously different times—and possibly even indefinitely.8

      If it is true, as I have argued, that (barring social revolution) the depression phase of the long-term cycle can only be resolved through the tremendous destruction of capital in an inter-imperialist world war, then the “period” or length of this cycle is now determined by events in the political sphere that might take quite different amounts of time to develop in different circumstances. For this reason I don’t think it is useful to talk about “the period” of the long-term industrial cycle.

      But even if the long-term cycle does not have any definite period (other than being quite long as compared to the standard industrial cycle), it is nevertheless still a cycle. It will continue to cycle indefinitely until one of two things happens: humanity gets rid of capitalism or capitalism gets rid of humanity.


5.5   Couldn’t capitalist governments have postponed depressions even before the imperialist era?

      The fourth set of questions raised earlier focuses on whether this “determined and effective” government action that leads to the containment and resolution of most recessions is something that is somehow inherently connected to the monopoly capitalist (or imperialist) form of capitalism. Couldn’t it have been possible for a government in the pre-monopoly capitalist era to set up a central bank with sufficient powers to deal with the surface contradictions of the economy and thus (in many cases at least) resolve recessions before the fundamental underlying contradictions of capitalist production fully came to a head? Couldn’t this “splitting in two” of the industrial cycle have even happened in the mid-19th century, for example, after the negative experience of one or two of the early overproduction crises that ran their full course?

      The answer is that conceivably this could have happened, but as a practical matter it could not have happened. Capitalist society and its ideologues and economic theoreticians were simply not smart enough to overcome their ideological blinders and recognize early on what the real cause of these crises was, let alone how to contain most of them. As is usually the case with humanity, it took long and bitter experience to work this all out in practice, and the ruling class (at least) is still not at all clear about it in theory. (They believe, for example, that because they have been able to contain and manage economic problems in recent decades that they should always be able to do so. But that is simply not true. That is just a dogma they have arrived at through their usual superficial and pragmatic approach to economic theory.)

      In section 4.1 I mentioned that one of the important changes in capitalism that occurred with the change to capitalist imperialism was a much greater role for the capitalist state in the regulation and control of each national economy. Increased government intervention in, and control of, the capitalist economy could conceivably have begun before the imperialist stage of capitalism developed, but it didn’t, and it is no surprise whatsoever that it didn’t. In the imperialist era capitalism requires a much closer cooperation between “private” companies (now in the form of corporations) and the state. Since capitalist imperialists based in one country now penetrate the rest of the world, they require their home governments to promote their interests internationally, and even to wage wars against other countries in order to win and guarantee them the right to exploit people there as well. In effect, there was the necessity of something like a qualitatively closer functioning of “private industry” and the capitalist state as pre-monopoly capitalism changed into capitalist imperialism. The capitalist state always existed as “partners in crime” with the capitalist enterprises, but with imperialism came the requirement for further functional merging of the two both politically and economically.

      So I would say that, yes, it is conceivable that capitalist governments could have intervened more forcefully and more intelligently to mitigate and resolve the difficulties that arose during crises in the pre-monopoly era, but that:

  1. They were not yet smart enough to effectively do so;
  2. It was not yet imperative that they do so;
  3. It took time and experience to create the necessary government agencies and methods to control (most) recessions;
  4. The development of corporations led to the necessary collective approach and ways of thinking that were required for the bourgeoisie to more effectively control the economy in a collective manner; and
  5. The qualitatively greater internationalization of capital in the imperialist era led to the necessity of closer cooperation between capitalist corporations and their imperial governments, and for the bourgeoisie to act more as a class to control the world political and economic environment.

      For all these sorts of reasons I think it is no mystery at all, and no “mere coincidence”, that qualitative changes in the bourgeoisie’s collective intervention in, and control of, the economy only developed with the shift of pre-monopoly capitalism to capitalist imperialism.



Notes for Chapter V

1   Scott Harrison, “Comments on Sison’s ‘Contradictions in the World Capitalist System and the Necessity of Socialist Revolution’” (1/23/2002), which is posted at: http://www.massline.org/PolitEcon/ScottH/SisonCr.htm

2   In this connection it is worth recalling Mao’s comments about how contradictions intensify as they go through different stages. Here is the relevant passage from section III of “On Contradiction”:
      “The fundamental contradiction in the process of development of a thing and the essence of the process determined by this fundamental contradiction will not disappear until the process is completed; but in a lengthy process the conditions usually differ at each stage. The reason is that, although the nature of the fundamental contradiction in the process of development of a thing and the essence of the process remain unchanged, the fundamental contradiction becomes more and more intensified as it passes from one stage to another in the lengthy process. In addition, among the numerous major and minor contradictions which are determined or influenced by the fundamental contradiction, some become intensified, some are temporarily or partially resolved or mitigated, and some new ones emerge; hence the process is marked by stages. If people do not pay attention to the stages in the process of development of a thing, they cannot deal with its contradictions properly.” [Mao Tsetung, Selected Works, vol. I, (Peking: Foreign Languages Press, 1965), p. 325. “On Contradiction” is available online at: http://www.marxists.org/reference/archive/mao/selected-works/volume-1/mswv1_17.htm]


3   “Most firms paid zero taxes from ’98 to ’05”, San Francisco Chronicle, Aug. 13, 2008, p. A1. The study by the Government Accounting Office showed that about two-thirds of both U.S. and foreign corporations doing business in the U.S. paid no Federal taxes during one or more years in this period. While many of these corporations were relatively small, also included were about one-fourth of the largest corporations—ones with more than $250 million in assets or $50 million in gross receipts. The full 32-page GAO report, entitled “Tax Administration: Comparison of the Reported Tax Liabilities of Foreign- and U.S.-Controlled Corporations, 1998-2005”, is available at http://www.gao.gov/new.items/d08957.pdf (as of Aug. 13, 2008).

4   However, I am not saying that all the major political contradictions in the world are now merged with the economic contradictions, in sort of one big knot! In fact elsewhere I’ve argued very strenuously against those who have championed such a notion—including both the adherents of what is known as General Crisis Theory, and also the RCPUSA with its theory of imperialist “conjunctions”. These people are guilty of “combining two into one” or of ignoring the “particularity of contradiction”. See my essays “Notes on Notes on Political Economy” (2000) at http://www.massline.org/PolitEcon/ScottH/NotesNPE.htm, and “Comments on Sison’s ‘Contradictions in the World Capitalist System and the Necessity of Socialist Revolution’” (2002) at http://www.massline.org/PolitEcon/ScottH/SisonCr.htm.

5   These short quotations are from the Communist Manifesto, in the passage I quoted in full in section 3.2.

6   These averages are reported by James C. Cooper, Business Week, Oct. 20, 2008, p. 12.

7   One of the worst and most simple-minded versions of the “breakdown theory” was that of August Bebel, who in effect argued at the 1891 congress of the Social-Democratic Party of Germany that the working class really didn’t need to bother making revolution at all, since, he said, “bourgeois society is working so vigorously towards its own destruction that we need only wait for the moment when we can pick up the power which has already dropped from its hands”. (Quoted in M.C. Howard & J.E. King, A History of Marxian Economics: Volume I, 1883-1929, (Princeton University Press, 1989), p. 72.) Since the actual breakdown of capitalism, if it happens, might well be because of a world war which destroys humanity, the true moral here is not that the working class need “do nothing”, but that if it wants to survive it needs to get off its ass and make revolution before such a war starts!

8   Of course in saying “indefinitely” here we cannot mean forever! If society is stuck in a very prolonged depression then eventually something will have to occur to resolve it. If my theory is correct on this point, that “something” can only be inter-imperialist world war or else social revolution.


Chapter VI: The Great Depression of the 1930s
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