The meaning of crisis

The meaning of crisis by James OConnor

This article is a critical review of the traditional or scientific marxist theory of crisis based on the definition of crises as an interruption in the accumulation of capital, or system disintegration, and, more broadly, on the concept of the inner logic or objective laws of motion of capitalist economy. It advances a critique of the traditional interpretation of Marxs thesis that the limit of capital is capital itself in terms of the tendency of the falling rate of profit and overproduction of capital. This article also contains a brief critical account of the dominant neomarxist theory of crisis based on the definition of crisis as an interruption of normative structures of action or social disintegration. It concludes with a re- construction of the concept of crisis as a social conflict or class struggle and social reintegration which is presented as a marxist alternative to the radical Durkheimianism of neomarxism.

I Traditional marxist economic crisis theory

In his study of the historical uses of the word crisis Randolph Starn (1971) writes that the word comes from the Greek (kpinein: to sift, to decide), meaning discrimination or decision. Crises were defined in classical Greek history writing as moments of truth when the significance of men and events were brought to light. The word was also used in Greek medicine to signify the turning point of an illness in which it is decided, Habermas writes, whether or not the organisms self-healing powers are sufficient for recovery (Habermas, 1975, l).l All of these usages focus on the concept of crisis as turning point and decision. Nineteenth century crisis historians similarly used the word to mean critical moments when national character and institutions were thought to have been decisively tested.

In traditional scientific manrist theory, economic crisis is defined as an interruption in the accumulation of capital (Fine, 1975, 51). Capitalist crises are inter- preted as objective processes of system dysfunction or system disintegration governed by the law of value which works itself out behind peoples back. The In Starns words, crises occur in diseases whenever the disease increases in intensity or goes away or changes into another disease or ends altogether.

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capitalist system itself decides its own turning points or critical moments of economic crisis, contraction, depression. In this view, human beings do not con- sciously produce economic crises nor can human intervention within the dominant capitalist relations of production actually prevent crises, although it is thought that crises can be postponed or displaced. These uses of the concept of crisis are clearly similar to the use of the word by medical science. Habermas writes that the critical moment appears as something objective or external, hence the crisis cannot be separated from the viewpoint of the one who is undergoing it - during an illness the patient experiences his powerlessness vis-d-vis the objectivity of his illness only because he is a subject condemned to passivity and temporarily deprived of the possibility of being a subject in full possession of his powers. Habermas concludes that we therefore associate with crises the idea of an objective force that deprives a subject of some part of his normal sovereignty.

In traditional marxist economic theory, the subject is capital itself, or the process of capitalist wealth production, which is deprived of its normal sovereignty by the objective or external force of economic crises. Capital defined as the social relationship of valorization loses full possession of its powers when too many, too large, and too prolonged ruptures occur in the three circuits of capital. Capitals ordeal ends with the restoration of its sovereigr,ty through the process of the many varieties of capital restructuring. In historical versions of crises theory, the nature of capital restructuring is determined by the relationship between the composition of capital and the composition of the working class, in turn determined by the effects of past crises and crises resolutions. In short, crisis is seen as a turning point in the economic process in which it is decided whether the systems self-healing powers are sufficient for the recovery and renewal of capital accumulation.

It has often been remarked that there is no single or dominant crisis theory in Marxs own work. Marx himself explicitly rejects any monocausal explanation of crises, Ernest Mandel writes, insisting that they are a combination of all the contradictions of the capitalist mode of production (Mandel, 1975, 3). Theories of crisis in fact appear and reappear in Capital in hauntingly similar ways to those in which economic crises appeared and reappeared in the west through the great depression of the 1930s. One reason is that no single or dominant definition of crisis exists in either Capital or later marxist theoretical works. At the risk of oversimplifying a complex issue, it is possible to identify three kinds of crisis in marxist thought. The first are the periodic crises associated with the capitalist business cycle in general and cyclical movements of the rate of profit in particular. The cyclical movement of capitalist production, Mandel continues, undoubtedly find its clearest expression in the cyclical movement of the rate of profit, which after all sums up the contradictory development of all the moments of the process of production and reproduction (Mandel, 1975). The extreme view that all capitalist crises are cyclical crises is exemplified by Howard Shermans reproach that all theories of long-run crises are incorrect and that there are no long-run down- turns or final automatic collapses of capitalism (Sherman, 1979,75).

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The second kind of crises which appears in marxist theory are precisely long run or structural crises which are analysed in terms of the long-run tendency for the rate of profit to fall or in the context of an accumulation model or both. The relatively technical approach to structural crises is to explain secular declines in the profit rate in terms of the rising value composition of capital, while explain- ing cyclical movements in the rate of profit in terms of the uneven development of the capital and consumer good sectors of the economy (Mandel, 1975, 4). The structuralist approach employs what Samir Amin has called an accumulation model. The idea behind the concept is that the expansive periods of the accumulation process take place within the framework of a specific capital structure, a specific class structure, a certain dominant ideology, and specific institutions. This framework can be said to form a specific accumulation model. The relationship between the accumulation model and a structural crisis is then explained by pointing out how the structural framework of the accumulation model develops increasingly contradictory and how, because of this, the accumulation model turns into a structural crisis. Structural crises can therefore be viewed as periods in the history of capitalist development where one accumulation model is sub- stituted for another, i.e., where some structures deteriorate and others are built.* This approach is consistent with Eric Hobsbawms definition of crises of capitalism as the rather lengthy periods of trouble, between 1815 and 1848, between 1873 and 1896, and between 1917 and 1948 (Hobsbawn, 1976, 79). It is also consistent with the world system theorists broader concept of crisis, together with Robert Heilbroners view that economic expansions, crises, and depressions or stagnations do not occur periodically or repetitively but rather at crucial junc- tures which bring about changes in seismic magnit~de.~ Finally, the accumulation model method is akin to the analyses of Gundar Frank, Ernest Mandel, and others who have argued that modern capitalism entered into a new structural crisis sometime in the 1960s, one which will not be resolved merely by policies aimed to increase the profit rate, but which will require thorough-going changes in post second world war institutions which have become counterproductive for capital (Gundar Frank, 1980). The difference between the concept of crisis as periodic economic fluctuations and the structural crisis concept is that Amin, Hobsbawm, el al., describe conjunctures and multiple contradictions within social, economic, and political life while Sherman refers to the periodic cycle alone. The bridge between these two definitions of crisis is erected in the accounts of the present crisis by Frank, Mandel, and others who try to show that structural contradictions of the system both cause and are caused by the increasingly short- lived and shallow cyclical recoveries and deeper and long-lasting recessions during the 1970s.

The final kind of crisis defined in marxist theory is sectoral crisis which is normally associated with the process of uneven and combined development.

Jens Hoff, Letter to the author, 20 November 1980. World capitalist crisis, in world system theory, occurs when there is a rupture or disarticu-

lation between the processes of development of the world division of labour on the one hand and state-formation/deforination on the other (Heilbroner, 1978).


Differences in the rate of profit between economic sectors and regions are explained in terms of the tendency for capital to accumulate in particular sectors and regions at the expense of others. Uneven development occurs because the rate of profit in branches of the economy dominated by large-scale capital concentrated in certain regions is relatively high because large-scale capital appropriates surplus value produced by other branches of the economy which are typified by small-scale capital. Similar arguments have been applied to profit rates in the developed industrial countries compared with those in the older underdeveloped regions of world economy. Combined development in which relatively advanced technology and forms of fwed capital are combined with relatively backward forms of labour power has the opposite effect. Relatively backward zones are developed by modem forms of capital at the expense of older industrial developed zones. The connection between cyclical and structural crises and sectoral crises is simply that the latter expresses the crucial spatial dimensions which are absent in the former. Today, for example, it is commonly thought that the modern structural crisis of capitalism in part assumes the form of the regional decline of the older northern and midwestern industrial zones and the simultaneous development of the south, southwestern, and western USA (Frobel et al., 1980; Bluestone and Harrison, 1980).

All three concepts of crisis and the different kinds of crisis theories advanced to explain the periodic cycle, structural crises, and uneven and combined development share the premise that capitalist economy is inherently crisis-ridden. Crisis theory is based on the further idea that capitalism is also crisis-dependent, that is, that crises are mechanisms whereby capitalism regulates itself. W e seeing crises as the expression of the contradictions of capitalist production, Michael Bleaney writes, Marx is very clear that they represent only a temporary break in the drive to expansion, a recreation of the conditions of that expansion which have temporarily broken down, rather than a manifestation of a tendency to stagnate (Bleaney, 1976, 110-19). Some marxist theorists argue that structural and sectoral crises alone self-construct through the process of capital restructuring.What defines a situation of structural crisis, Manuel Castells writes, is that it becomes impossible to expand or reproduce the system without a transformation or reorganization of the basic characteristics of production, distribution, and management, and their expression in terms of social organization (Castells, 1980, 8). Other theorists argue that capital restructuring in the form of weeding out of inefficient enterprises, strengthening of larger and more efficient capitals, down- grading of job structures, and so on also characterize the periodic capitalist cycle.

The historical record clearly shows that western capitalism has been convulsed by cyclical and structural economic crises which have assumed different forms in different times and places. Economic history also shows that crises and depressions have been periods of capital restructuring or self-construction. While historians have often understood crises to be immanent in the historical process, historical evidence cannot prove that capitalism is inherently crisis-ridden nor st i l l less that it is crisis-dependent. Crisis theory has a definite logical status within the problematic of Marxs theory of capital and anyone who adopts this problematic is

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forced to demonstrate logically that economic crises not only happened in history but were historically necessary and inevitable.

I1 Structural origins of economic crisis

In marxist theory economic crisis is always latent in capitalist economies for two reasons: first, capitalist production is commodity production hence subject to anarchy of the market; second, capitalist production is surplus value production and realization. The first crisis potential exists because of the split between the sale and purchases of commodities which are produced for the market. (Marx, edn 1967, I, 113). When this split becomes too great there occurs a disjuncture in the process of capitalist reproduction (Fine, 1975, 58). The development of the credit system (an ever-lengthening chain of payments) creates the possibility of deeper money or credit crises which exacerbate other crisis tenden~ies.~ Mandel (1975, 13) has argued that in late capitalism a credit cycle temporarily distinct from the industrial cycle comes into being. Ruptures within and between the commodity and money (including credit) circuits of capital are manifested in realization and/or liquidity c r i se~ .~

The second potential for economic crisis exists because the conditions of direct exploitation, and those of realizing it, are not identical. They diverge not only in place and time, but also logicully. The first are limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society (Marx, edn 1967, 111, 24445, italics added). This is a logical contradiction because favorable conditions of surplus value production imply unfavorable conditions of value realization and vice versu. The reason is that the consumer power of society is limited by the working class share of total production and income which is inversely related to the conditions of direct exploitation. Small consumption baskets and/or a low unit value content of the average consumption basket facilitate surplus value production and for this reason obstruct the realization of values. Everything else being the same, the result is overproduction of capital. Big consumption baskets and/or a high unit value content facilitate the realization of values and for this reason hold surplus value production in check. The result is underproduction of capital. Overproduction and underproduction of capital express themselves as realization and liquidity crises, respectively, and both take the form of falling profit rates.

In addition, potentials for overproduction and underproduction of capital give rise to possibilities of disproportionalities between effective demand and produced Credit creates situations in which forced sales or sales to meet payments become necessary when banks press for payments on loans and during times when merchant revenues are slow and meagre. A well-developed credit system thus increases changes of a crash or abrupt fall in prices including prices of fixed constant capital (i.e. devalorization). The credit system is governed by quasi-independent processes (de Brunhoff, 1976,107-1 18).

Tugan-Baronowsky and Hilferding believed that the anarchy of the market was the source of crisis itself, not merely the source of crisis potential; hence their belief that state planning or organized capitalism could prevent or ameliorate crisis. A good review is Jacoby (1975).


values in Departments I and 11. During periods of economic expansion, Department I grows faster than Department 11. Up to a certain point, capital supplies its own demand which prevents the overproduction of capital.$ This means, however, that productive capacity expands more rapidly than the consumer power of society which increases the possibilities of overproduction of capital. During periods of economic contraction, Department I declines more rapidly than Department 11. Up to a certain point, capital demands its own supply which prevents the underproduction of capital. This means, however, that productive capacity contracts faster than societys consumption power which increases possibilities of underproduction of capital.

An adequate theory of crisis and account of historical crises in western capitalist development require more than the identification of logical possibilities of crisis within the capitalist mode of production. It also requires that we find logical probabilities of crisis within the problematic of Marxs theory of capital. In capital theory, the proximate cause of economic crisis is the falling rate of profit. Cyclical movements of the profit rate hence cyclical crises are explained in terms of the uneven development of Departments I and 11. Secular declines in the rate of profit are deduced from the hypothesized relationship between the value composition of capital (C /V , or the ratio of dead to living labour) and the rate of exploitation ( S / V , or the ratio of surplus to necessary living labour).8 The rate of profit hence the potential rate of accumulation, i.e., the rate at which surplus value can be converted into more capital, is defined as S/C+V, or S/C/V+l. This formula in- dicates that the rate of profit changes directly with the rate of exploitation and inversely with the composition of ~ a p i t a l . ~

The key variable in the theory of the falling rate of profit is the composition of capital, which expresses the state of technological progress, capitalist competition, and in most versions of marxist theory the class struggle. Increases in the composition of capital and productivity in Marxs view are associated with increases in C/ I/ and s/ V , but the increase in the former is greater than the increase in the latter. The rate of profit does not fall because labor becomes less productive but because labor becomes more productive(Marx, edn 1967, 111, 240). Hence, the rate of profit falls despite the fact that the rate of exploitation (as well as the mass of surplus value) increases (or at the limit remains constant).

The conditions under which Department I can expand with limited consumer goods markets was the centre of the debate between Lenin and the Narodniks. The issues involved are dis- cussed in McFarlane (1970). Makato Itoh (1975, 18) sums up the issue this way: The deep difficulty of treating labour power as [a] commodity [underlies] the inner contradiction of capital production . . . and bursts out in periodic crises. This expression is equivalent to C / V defined as the ratio of constant to variable capital and S / V defined as the ratio of surplus value to variable capital. C/V+S is sometimes used as the ratio of dead to living labour on the grounds of greater accuracy.

The value composition of capital and the rate of exploitation are the two main variables in Marxs theory of the profit rate. Two secondary, albeit important, variables are the turnover time of circulating capital, which is related to technological change in transportation and communications and the speed at which commodities sell, and raw material prices, or the cost of the elements entering into constant and variable capital.

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This line of reasoning, which many marxists apply to the current crisis, requires some elaboration. Marxs main point is that while the source of profit is surplus labour, the connection between the rate of exploitation and rate of profit is an indirect and fetishized one. The composition of capital mediates the relation between exploitation and profit hence the relation between the profit rate and accumulation. According to Marx, capitalist development of the forces of production consists of the substitution of dead labour for living labour; the very definition of progress is that the composition of capital successively rises. This expresses the basic contradiction of the capitalist system because living labour alone produces surplus value. It is a contradictory feature of capital, Ben Fine writes, that individual profit is pursued by reducing values through relative expulsion of living labour, which is the source of surplus value, from production (Fine, 1975,55).

According to Marx, in the course of capitalist development the system loses its capacity to produce surplus value in sufficient quantities to continue to expand for two reasons. The first is that there exists an absolute limit on exploitation given the limit on the length of the working day, the number of workers, and the size of the average consumption basket (although not the unit value content of the average consumption basket which theoretically could approach zero). These limits restrict both the rate and mass of surplus value. The second reason is that the cost of reproducing constant capital on an expanded scale successively increases. At a high stage of accumulation, Paul Mattick writes, value demanded for additional constant capital must have been so great that it finally absorbs all of the surplus-value. A point must come when the parts of surplus-value to be used for additional workers and for capitalist consumption must decrease ab- solutely. This would be the turning point at which the previously latent tendency to collapse begins to be active (Mattick, 1934, 7).l O Put another way, constant capital finally assumes such a large proportion of total capital that relatively less of societys labour time appears as surplus value while more labour time is re- quired to reproduce constant capital on an expanded scale. Accordingly, in Michael Lebowitzs words, the falling rate of profit is an absolute, ultimate barrier which cannot be surpassed by increases in productivity (relative surplus value) or exten- sions of the work-day (absolute surplus value). The declining rate o f . . . profit is a h u t to the production surplus value, a limit immanent in production (Lebowitz, 1978,86).

It will be noted that until now nothing has been said about the realization of profits, only about the production of profits. Marx stresses the importance of the problem of realizing profits in a famous passage that states the more productive- ness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest (Marx, edn 1967, 111, 245). This tendency is reinforced by accelerated obsolescence of fmed capital because of continuous lo This is Matticks critique of the standard marxist thesis that despite the relative expulsion

of living labor from production, and the lack of surplus value relative to capital advanced, there is but for exceptional circumstances an absolute increase in both surplus value and employment (Marx, edn 1976,111, 56). See also Jacoby (1975).


technological change, which forces individual capitals to replace means of production before they have transferred all of their embodied value to commodities. Capital needs more and more time to realize the value invested in fixed capital, Manuel Castells writes, but allows itself less and less time to do so (Castells, 1980, 56). Lebowitz sums up the problem of the relationship between value production and value realization thus: The drive of capital to expand the production of surplus value by reducing necessary labour relative to surplus labour and the number of workers relative to means of production creates barriers to the realization of capital [as well as the production of capital]. A gap opens up, a gap between the productive power of society and the consuming power. Rising circulation time reflects this growing gap; it reflects the difficulty of selling . . . . It is the increase in circulation time which leads to the crisis: The crisis occurs not only because the commodity is unsaleable, but because it is not saleable within a particular period of time. In the event that more capital is employed in the sphere of circulation with the purpose of reducing circulation time to prevent a realization crisis, more capital is utilized unproductively, which increases the risk of underproduction of capital. Poised on the knife edge of crises of overproduction and underproduction, capital damned if it does and damned if it doesnt.

Marx stresses that the contradiction between value production and realization expresses itself in the falling rate of profit. He argues that the tendential law of the falling rate of profit is a systemic phenomenon. Individual capitalists are assumed to be blind to the ways that their uncoordinated, separate actions result in either overproduction or underproduction of capital hence the falling profit rate origina- ting in realization and liquidity crises, respectively. The premise is that individual capitals expect constant or rising profit rates hence steady or increased economic growth rates. They expand production of means of production and wage goods accordingly. Additional fixed and circulating capital is produced with the expectation that other capitals will buy plant, equipment, and raw materials for their own expansion. Additional wage goods are produced with the expectation that other capitals will employ more labour power which in turn wiU create an expanded market for wage goods. When the profit rate declines, total profits sooner or later become too small to permit individual capitals to buy additional constant capital and employ additional labour power. Exactly when this occurs depends on what values are assigned to the key variables in the model of accumulation. The result is an unplanned expansion of inventories of means of production and wage goods destined to expand the economys productive capacity and to feed, house, and clothe an expanded work force, a wave of general pessimism, an economic turning point or crisis, and contraction. The anarchy of capitalist production

Lebowitz (1978,90) quoting Theories of surplus value III (London, 1952). The distinction between effective demand for replacement means of production and sub-

sistence and demand for additional means of production and wage goods is ignored in the most thorough attack on the falling profit rate theory to date, which weakens the critique consider- ably. It is at least possible that the rate of profit may become so low that capitalists lose any incentive to accumulate and, thereby, generate a lack of demand for means of production as well as (via a fall in the level of employment) for means of subsistence (Van Parijs, 1980, 9).

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makes crisis possible, Ben Fine writes, summing up the issue, but the falling rate of profit makes it inevitable. This is because a crisis is the social outcome of the interaction of pessimistic capitalists individual decisions, whereas a falling rate of profit is the social outcome that makes these decisions certain (Fine, 1975, 58).

Many attempts have been made by marxist and non-marxist economists to refute the tendential law of the falling rate of profit on the grounds that its premise is unrealistic and/or that it is logically confusing or inconsistent.13 The most common argument against the falling rate of profit theory is that capitalist investment in fixed capital actually increases the technical composition of capital, or C/L where C is total constant capital and L is total employment, not the value composition of capital, or C/V where C is total constant capital and V is L / v or total employment in relation to the value of labour power per unit of employment. The claim is that increases in the technical composition of capital, or a rise in the amount of machinery per worker (or a general increase in physical productivity per worker), may or may not increase the value composition. It is ad- mitted that, everything else being the same, if u falls or remains unchanged, a rise in C/L necessarily increases C/V (or C/L/v) . But everything else may not be the same. A technical innovation which increases C/L may reduce the value of means of production in relation to means of subsistence (i.e., wage goods) hence lowering C/V. In principle, this criticism is well taken. In practice, it is unrealistic because capitalisms drive to lower the value of wage goods is the mechanism which permits the standard of living of the working class to rise and at the same time the rate of exploitation to increase. The argument that technical change reduces the value of means of production in relation to the means of subsistence fails to grasp what Marx argued was an inherent quality of the capitalist mode of production.

A related argument is that technological change embodied in new means of production may not even result in an increase in C/L or the technical composition of capital. The claim is that there is no reason to expect that C/L will increase if technological change is capital-saving as well as lab~ur-saving.~~ It is true that examples of capital-saving innovations can be found in the economic history of the west. It is also true, however, that capital-saving investments have the ultimate effect of lowering the value of labour power, i.e., the cost of producing the average consumption basket. In fact, technical change in capitalism is governed

13 Van Parijs (1980). In the interests of brevity and clarity, I ignore the arguments against Marxs profit theory which confuse marxist and neeRicardian theory (i.e., which mix up profit strictly defined and profit arising when individual capitals get a jump on their com- petitors via cost-cutting innovations - profits which are actually a form of rent) and con- centrate on classical marxist arguments and counterarguments. 14 Mandels answer to this is that new equipment must be constructed with preexistent machinery and pre-given techniques, and its own wlue is thus determined by present labour productivity . . . and since this equipment cannot be mass-produced in the initial stages the assumption (which is needed to make the criticism valid) that productivity growth in Depart- ment I is more rapid than in the economy as a whole is not tenable (Mandel, 1975, 202-203). Mandel could strengthen his case by adding that technical change designed to raise productivity in Department I1 may not increase productivity in Department I at all.

3 10 The meaning of crisis

first and foremost by the need to expel living labour from production, which normally lowers the value of the average consumption basket, and only secon- danly by the need to economize on constant capital. This need is thought to be inherent in the capitalist mode of production because of capitalist competition and class struggle, and, in this sense, technical change effecting an increase in the value of means of production in relation to the means of subsistence of the working class is overdetermined. The counterargument is that if C/V is very large, capitalists have that much more incentive to economize on constant capital. How- ever, a large C/V is historically associated with a developed and organized working class which exercises structural power over wages, hours, and working conditions. This means that capital has that much more incentive to expel living labour and raise C/ V further.

Still another argument against the falling profit rate theory is that an increase in the technical composition of capital may reduce the costs of raw materials, fuel, and other elements of constant capital with the result that the tendency of the rate of profit to fall is inhibited or even re~ersed . ~ New mining machinery, for example, will cheapen raw materials. However, cheap raw materials or circulating capital indirectly find their way into the average working-class consumption basket. New mining machinery cheapens coal which lowers the value of many wage goods. Whether new machlnery or techniques reduce the value of means of production more or less than the value of wage goods depends to a degree on the technical characteristics of the raw materials, fuels, etc., themselves. Certain kinds of hardening metals are useful only in Department I; oil is utilized simultaneously in Departments I and 11; etc. The mass of raw materials, however, are normally used in both Departments. Moreover, materials used exclusively in Department I indirectly lower the value of the average consumption basket. To assume otherwise is to assume away social reproduction in general and the relationship between Department I and I1 in particular.

It seems safe to conclude therefore that the major, if not the only, case in which the value composition of capital is likely to remain the same or fall with any given increase in the technical composition or reduction in the cost of the elements of constant capital is when v increases. But a basic article of faith in traditional marxist theory is that increases in the technical composition of capital by defmi- tion cancel any increases in v. The bottom line of marxist theory is that the average consumption basket can only rise when its value content declines, i.e., only when

Marx himself argued that as capital expels more living labour from production, the tendency of the falling profit rate will assert itself sooner or later (Marx, edn 1967, 111, 233). Phillip Armstrong writes that Marx gives no reason why the cheapening of the elements of constant capital could not permanently prevent the rate of profit from falling (Armstrong, 1975, 4). Harris also sounds the warning that a problem arises when we take into account the fact that an increasing mass of means of production is usually accompanied by a decreasing value of commodities including the elements of constant capital. In that case, the increasing mass may or may not be offset by the decreasing value. This leaves the direction of change ambiguous (pers. comm. 1 March 1980). I am grateful to Professor Harris for helping me turn an intuitive approach to some of the problems dealt with in this section into a more analytically rigorous approach.

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the system produces the consumption basket at less cost. It may be concluded that a rise in the value composition of capital normally but not inevitably accom- panies an increase in technical composition presupposing the conditions of social reproduction of labour power remain unchanged, that is, that the size of the average consumption basket multiplied by its average value content either falls or remains the same. These lines of reasoning strengthen the view that the rate of profit is likely to fall because of the rise in the value composition of capital, hence the view that economic crisis is logically probable (not merely logically possible) in the process of capitalist accumulation. In the course of a capitalist boom, a critical point is reached when C/V increases sharply while S / V remains constant or declines owing to labour shortages and the wage struggle. The result is an absolute overproduction of capital followed by a steep and sudden fall in the general rate of profit. The subsequent crisis consists of a drying up of possibilities of profitably exploiting labour, which leads to a fall in production, layoffs, reduced wages and wage spending, etc. The greater the increase in C/V during the boom and the higher the level of employment and lower the rate of exploitation, the more sudden and extensive are layoffs and other crisis features.16

As we have seen, traditional marxist theory holds that increases in the technical composition of capital (C/L) increase the value composition (C/L/v) by reducing v. This is another way of saying that rises in the technical composition of capital increase the rate of exploitation (assuming the size of the consumption basket remains unchanged or grows at a relatively slow rate and that hours of work remain unchanged or fall at a relatively slow rate). The increase in the rate of exploitation obviously moderates the adverse effect of the rise in the value composition of capital on the rate of profit. In effect, the capitalist system takes surplus value out of one of the capitalists pockets and replaces more or less the same amount in another pocket. In terms of capital production, the rate of profit musr fall only when the size of the average consumption basket increases more rapidly than the decline in its value content or when its value content as well as absolute size increases. This line of analysis presupposes, however, that there exists no structural gap between value production and value realization. But the essence of capitalism is precisely the contradiction between the production and realization of values and surplus value. Hence, sooner or later in the course of capitalist accumulation, the realized or actual profit rate must decline whether the value content or size of the consumption basket rises or falls. On the one side, if the value content and/or size of the consumption basket declines, the actual rate of profit will fall because of overproduction of capital. If capital is used unproductively to shorten circulation time, more capital becomes in effect constant capital. On the other side, if the value content and/or size of the consumption basket increases sufficiently, the actual rate of profit wdl fall because of underproduction of capital. In sum, the decline in the rate of profit is the way in which the contradiction between production and circulation of capital expresses itself, Michael Lebowitz writes. It is no more possible to eliminate from Marxs argument the tendency for the rate of profit to fall than it is to eliminate the sphere of circulation (Lebowitz, 1978,90).

16 For a sharp discussion of these and related issues, see Armstrong (1975).

3 12 The meeting of crisis

111 Structural functions of economic crisis

According to modern social-scientific principles, theories of the historical origins of social processes cannot also serve as explanations of the historical functions of these processes without the risk of confusing individual will formation and action with system will formation, which according to traditional marxism in capitalism is necessarily unplanned and uncontrolled. The same warning applies to theories of the structural origins and functions of economic crisis in the capitalist mode of production. The claim that the contradiction between value production and realization and falling profit rate constitutes the source of economic crisis cannot be appropriated to show that economic crises function to resolve this contradiction and in some systemic manner increase the profit rate.

The reason is that the process of crisis-resolution is qualitative as well as quantitative. The course of any crisis including its eventual outcome depends not only on certain adjustments in the quantitative relationships between the main variables in the model of accumulation but also on adjustments in the capital-labour relationship within the circuits of capital, social life, and politically. In marxist theory, capitalist accumulation per se is understood as a qualitative as well as quantitative process. Marx drives home the point time and again that accumulation consists not merely of the expansion of capitalist wealth but also of the development of a capitalistic labour process, not to speak of other forms of capital restructuring such as concentration and centralization of capital, industrial relocation, uneven development, etc. Marx argues that these kinds of qualitative changes do not occur regular- ly or smoothly. They require periodic ruptures in the circuits of capital, or periodic and structural crises. A crisis always forms the starting point of large new investments, Marx writes (edn 1967, 11, 186). Crises are the occasions for the necessary introduction of new production methods; takeovers and mergers between capital units; reorganization of labor markets including the forms in which labour power presents itself to capital; industrial relocation; etc. Crises are external, objective forces which compel capital to reorganize itself to prepare for new rounds of capital accumulation. In this sense, qualitative changes in the forms of capital during crises and depressions turn into quantitative changes during recoveries and booms, which sooner or later selfdestruct hence forcing more qualitative change. Quality changes into quantity which changes back into quality. Without contra diction, no movement; without the falling rate of profit, no innovation, no rising productivity of labour (Lebowitz, 1978,93). A crucial point of departure between bourgeois economics and marxism, therefore is that within the latter tradition there is general agreement that capitalism is not only crisis-ridden but also crisis-

Thus it can be argued that Marx utilized the models of expanded reproduction in Cclpitul I1 not only to clarify the relationships between Departments I and I1 as most Marx scholars claim, but also to lay a basis for analysing quantitative changes during economic expansions. In Capital I , Marx presents accumulation of capital as qualitative changes in production. In Copiful II accumulation is presented as quantitative changes in circulation, i.e. growth of exchange value or total revenues. This in my view is why the reproduction models are found in volume II.

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dependent.I8 Capital accumulates through crises which become the cauldrons in which capital qualitatively reorganizes itself for future economic expansion.

There is disagreement within the marxist tradition about the nature of the connections between structural sources and function of crisis, i.e., about the mechanisms which restore conditions of profitable accumulation. The general disagreement concerns the relationshp between crisis theory and the so-called offsetting tendencies to the falling rate of profit, i.e., cheapening of raw materials; manipulation of terms of trade; industrial relocation; wage cuts below the value of labour power; and increased intensity of work. Most marxists argue that the function of these offsetting tendencies is to postpone economic crises; some claim that these tendencies function specifically to resolve crises. In other words, do these tendencies ameliorate the contradiction between value production and realization during periods of economic expansion or do they resolve this contradiction during crises, or both? It is clear that all five offsetting tendencies are crisis-resolving agents insofar as capital deploys them to resolve the contradiction between value production and reali~ati0n.l~ It may he argued, for example, that imperialist manipulations of the terms of trade not only tend to prevent crises but also to resolve crises it cannot prevent.

It may also be argued that capitals most powerful crisis-fix is the expanded reserve army of labour and the reorganization of the labour market and labour power itself, which permit wage cuts and speed-up. What is clear is that the most important form of crisis-induced capital restructuring - restructuring the means of production - is not included in Capital as an offsetting tendency. Neither is the process of state intervention in the reorganization of capital, which some marxists believe to be the crucial factor in contemporary crisis-resolution (while others believe that capital basically restructures itself through the mechanisms of the world market and control of the labour process).

It will pay to address these issues one at a time. The first is the role of the reserve army of labour and reorganization of labour markets and the form of labour power in the process of crisis resolution. In Capital, Marx calls the reserve army the lever of capital accumulation. He meant that a reserve labour force has to be available during economic booms to permit particular spheres of the economy to expand without injury to the scale of production in other spheres (Marx, edn 1967, I , 632). In another passage, Marx writes that the reserve army also regulates the wage rate. These passages together mean that the reserve army functions to maintain stable wage rates during periods of economic expansion.

The only major bourgeois economists who dealt with the problem of the capitalist cycle and crises in a serious way were Joseph Schumpeter and Wesley Mitchell (some would add J.M. Keynes, who in my view remained an equilibrium theorist). They were also two of the very few economists who emphasized qualitative changes in the process of growth. Schum- peter stressed creative destruction as the engine of growth (modern ecological economists call this destructive creation). Mitchell stressed the role of depressions in stimulating the rationalization of production processes (Mitchell, 1927; 1963). l9 It is in this latter sense that Catley (1975) uses the concepts of offsetting tendencies. The great majority of marxist economists use the concepts in the former sense.

18


The question arises, what role does the reserve army play during periods of economic crisis and contraction? Does the recreation of a reserve labour force permit wage cuts and speed-up, and hence increase the rates of exploitation and profit, thus functioning as a lever of accumulation. Maurice Dobb suggests that this is the case when he argues that it is precisely working-class economic strength during economic booms which causes crisis. From the standpoint of capital, he writes, progress is arrested and crises occur, because wages are too high . . . 20 The tide that leads to fortune is the ebb tide of crisis and contraction which recreates the reserve army and lowers wages hence restoring conditions for profitable accumulation.

Most marxists, however, argue that the reserve army of labour, wage reductions, and speed-up are of secondary importance. The crisis derives from the necessity for a fundamental restructuring of productive capital, Fine and Harris write, . . . high . . . unemployment does not basically result from the need of distribu- tional struggle (although this plays a secondary, related role) but from the need for a break in the circuit of capital to release money, means of production and labour-power, so that they can, at a later stage of the cycle when the expansion of capitals circuit is renewed, be reemployed in a circuit based on a restructuring of productive capital (Fine and Harris, 1976, 112).21 According to this view, capitalism needs successively greater capital concentration and centralization and a more capitalistic labour process and the crucial mechanism is the process of crisis- induced restructuring of means of production.

The basic premise of this argument is that crisis reduces the value of constant capital without impairing its physical productivity. The decline in the value composition of capital without a concomitant decline in its technical composition will, of course, raise the profit rate. The argument continues that subsequent capital restructuring redistributes surplus value to fewer capitals meanwhile in-

What was to prevent capital accumulation, with the increasing demand for labour which it engendered, from raising the wage-level until surplus-value disappeared, so that capitalism of its own momentum should extinguish the class inequality of which it was reared? . . . . The crucial factor which operated here - according to Marxs theory the defensive mechanism by which the system inhibited its own selfextinction - consisted in the double reaction whereby the industrial reserve army was periodically recruited: the tendency of capitalist economy to have a bias towards labour-saving changes and the tendency for accumulation to be retarded and investment to recoil when signs of any appreciable fall in the rate of profit appeared. On the one hand, this intensive recruitment of a labour-reserve . . . and, on the other hand, the extensive recruitment of new labour-supplies by increase in population, by proletarianization of intermediate social strata, or by extension of investment in virgin colonial areas, were the factors which operated continually to depress the price of labour-power to a level which per- mitted surplus-value to be earned. . . . From the standpoint of capital, accordingly, progress is arrested and crises occur, because wages are too high . . . (Dobb, 1937, 127-28). Dobb avoids the charge that his crisis theory is merely a modem version of Adam Smiths thesis that the falling profit rate is due to a high wage/profit squeeze by adding that such a statement is. of course, strictly relative to the assumption that a certain minimum return on capital is necessary, and only retains any meaning in this context. Rather it is true to say that crises occur because profit and interest are too high; since such a statement draws attention to the fundamental fact that, by comparison with a system of social production, the real barrier of capitalist production is capital itself.

James 0 Connor 3 15

creasing efficiency, which further raises the profit rate. The Phasing out of un- profitable capitals and the increase in efficiency of surviving capitals occur in two ways. First, the normal process of crisis-induced bankruptcy or business failure reallodates existing surplus value to fewer and more productive capitals, hence raising the rate of exploitation and average profitability. Second, the buying up or absorption of weaker capitals by more productive capitals has a similar effect.

It is also widely believed that capital restructuring in contemporary capitalism means the relocation of industry on a wider geographical scale as well as restructuring of means of production. Industrial relocation supposedly raises the average rate of profit in three ways. First, the geographical expansion of industry permits capital to exploit a widening circle of reserve labour which in turn is the result of the industrialization of the countryside or capitalization of agriculture. The argument is that capitalist efficiency increases with the development of the social division of labour, e.g., when certain regions specialize in administration, finance, research and development, and related activities while others specialize in basic or light industry. Second, industrial relocation inhibits worker migration to older industrial centres. This keeps the working class divided geographically and prevents new workers from getting access to high wages in the older industrial regions and also reduces demands on the welfare state in the imperialist countries. Third, industry typically relocates to regions with authoritarian governments which are ready to help finance new investments and also prevent the development of bcal workers movements.

Putting these lines of analysis together suggests that crisis-induced recreation of the reserve army of labour is a lever of accumulation to the degree that it is a lever of capital restructuring. This means that layoffs during the early stages of economic crises permit capital to reestablish its domination over the working class which in turn is a socjal and political precondition for restructuring the means of production and relocating industry. Concentration and centralization of capital, increases in productive efficiency, and industrial relocation in turn generate more unem-

Howell adds another argument. It is possible, he writes, to explain a decline in the profit rate by an increase in the V/C, hence a decrease in S/V if the entire wage fund is considered to be variable capital. His answer to this view is that because S /V is so high there develops the unproductive luxury Department IIB with its own wage fund. Moreover, unproductive realization labour is paid wages which should not be included in variable capital. For these reasons, V is smaller than the total wage fund. He then argues that luxuries (Department IIB) do not enter into the consumption of the working class, hence play no role in the determination of the value of labour power. Hence, a rise in C/V in Department IIB will accelerate the tendency for the profit rate to fall, not inhibit it. He adds that a reduction in V in Department IIB through the rise in C/V reduces the mass of surplus value and hence reduces the profit rate. In sum, his argument is that the overall tendency for the increase in C / V to raise S / V and reduce the profit rate is accelerated because Department IIB output is not part of the value of labour power. The falling profit rate, therefore, means a big reduction in demand for Depart- ment IIA output which does enter into the value of labour power. Department IIB plays a crucial role in the crisis because when demand for its output falls, unemployment rises, reducing the demand for consumer necessities produced in Department IIA (pp. 63, 65, 66). This whole line of analysis, of course, assumes that Department IIB expands on the basis of surplus value produced elsewhere and also that Department IIB output does not enter into the value of labour power.


ployment. This means that in subsequent short or long-term economic expansions an even larger reserve army is available to throw into production. It is not the original layoffs, therefore, but the second round unemployment which is the result of capital restructuring which theoretically makes the next boom possible without excessive upward pressures on wage rates. In this sense, the reserve army is the key to restructuring means of production and also the systems capacity to enter into a new phase of expansion. This seems to be especially true today when there is a restructuring of the work force through changes in education, labour recruitment, collective bargaining systems, welfare, etc., which change the form in whch labour power presents itself, or which shape labour power in ways which satisfy capitals needs (see, for example, Deitch, 1973,498).

In recent years, marxist economists have disagreed about the relative importance of economic and political factors in the process of capital restructuring (understood to include the restructuring of labour markets and labour power). On one side there is the traditional argument that market forces themselves are sufficient to force capital to reorganize itself during crises. This is not supposed to occur in the classical way which Marx himself described, i.e., through price deflation, including deflation of the value content of constant capital which reduces the organic composition of capital and increases the rate of profit. This version is obviously unrealistic in a world of oligopolistic corporations and permanent inflation. It is thought to occur through the credit system and stock market. Overextension of credit during preceding booms result in rising debt/equity ratios which in turn cause periodic liquidity crises, business failures, and consolidation of larger capitalist enterprises. This process of purging weaker capitals occurs without any need for political intervention. At the same time, the willingness of big capitalist and institutional investors to supply money capital to big capitalist firms alone is greater during crises. The so-called two-tier stock market starves smaller enterprises of ~api ta l . ~ The resulting passive destruction of inefficient capitals raises average efficiency and the average rate of profit in the economy as a whole. On the other side, there is the argument that the accumulation process today is not self-regulating in the traditional sense, and that the systems capacity to resecure favourable profit conditions is dependent on political means and legitimations and state planning.24

2z Marxs view was that credit accelerates the violent eruptions of this contradiction - crises - and thereby the elements of disintegration of the old mode of production . . . . The credit system appears as the main level of overproduction and overspeculation in commerce solely because the reproduction process, which is elastic by nature, is here forced to its extreme limits, and is so forced because a larger part of the social capital is employed by people who do not own it and who consequently tackle things quite differently than the owner . . . . This simply demonstrates the fact that the self-expansion of capital . . . . permits an actual free development only up to a certain point, so that in fact it constitutes an immanent fetter and barrier to production, which is continually broken through by the credit system (edn 1967, 111, 441). In other words, credit plays a greater role in crisis-creation than crisis-resolution. p 3 Can US industry find the money it needs? Business Week 22 September 1973. 24 This is not to deny that state credit and money policies; policies which establish the rules of the game in the stock market; manpower and investment policies; etc., and especially war have been an essential element in capital restructuring in the past.

James OConnor 3 17

N Economic crisis, social disintegration, working-class revolution

In traditional marxist theory, crisis-induced capital restructuring is not certain to restore profitable conditions of accumulation. First, capitals own self-healing powers may be too weak. Second, capital restructuring is a qualitative as well as quantitative process which includes unemployment, changes in the labour process unfavourable to labour, social disruption, bankruptcy, and so one. Hence, economic crises stimulate different kinds of social movements and worlung-class struggles. In effect, economic sysrem disintegration causes social disintegration. Crises become cauldrons not only of capital restructuring but also of reformist, revolutionary, and counterrevolutionary political mcvements, including fascism (see, for example, Sinclair, 1976). In this way, traditional marxism modifies the medical model of crisis and raises possibilities not only of a restoration of capitals normal powers, but also of revolutionary social and political transformation. This view parallels the tradition of tragic theater, in which the perilous moment of crisis is eternal, [which] exemplifies this sense of crisis as moments which present rich possibilities for the regaining of free subjectivity against the pseudo-power of Fate (Keane,

The view that capitalism develops according to its own inner logic or laws of motion, but that general economic crisis creates possibilities for social transformation, was advanced by Marx himself, subsequently misunderstood by Karl Kaut- skyz6 and German Social Democracy, refined by Lenin and Bolshevik theory, and is kept alive today by traditionalists such as Ernest Mande1.l The objectivist Marx wrote that in view of the general prosperity which now prevails there can be no question of any real revolution. A new revolution will be made possible only as a result of a new crisis.z8 Kautsky and many others misinterpreted this and similar remarks in the sense that Marx was referring to bourgeois revolution which was unlikely to occur in good economic times. In Marxs political theory, the proletarian revolution comes only with the failure of the bourgeois revolution, or its success together with its refusal to go all the way. Marx did not and could not write anything meaningful about proletarian revolution per se because he died well before the full development of the modern working-class and salariat. Lenin was more or less in the same boat. The crucial point in leninist doctrine is that subjective processes of working-class consciousness and will formation are important only insofar as economic crises create mass militancy, which becomes the social

1979, 184-85).2s

zs Keane adds that in Rousseauian thought crisis raises the possibility that man can be re- made in the image of their true selves (p. 185). 26 The history of mankind is determined, not by the ideas of man, but by the economic development which precedes irresistably obedient to certain underlying laws and not according to the whims and wishes of people (Kautsky, 1904,34). 1 7 E.G. Mandel (1979). Mandel . . . makes a fairly sharp penetration between the economic dynamics of capitalist economies and the political impact of tendencies and shifts in the force of class struggle (Gordon, 1979,438).

Keane (1979, 186) citing a post Communist Manifesto article by Marx in Neue Rheinische Zeitung.


material which the Party politically organizes to challenge the capitalist state. In this view, crises themselves remain objective, external forces which deprive both capital and labour of their normal powers, while the Party organizes and embodies workingclass resistance and subjectivity. The Party supplies the theoretical analysis of capitalist economy and society, which is undoubtedly the revolutionary praxis par e x c e l l e n ~ e ~ ~ and, on the basis of the subsequent reform of consciousness, organizes revolutionary political struggle. The Party in essence intervenes in historical processes which otherwise work themselves out in ways which restore conditions of capitalist accumulation.

The ideas of crisis as historical objectivity and the Party as organized subjectivity may be plausible when the working class is undeveloped or half-formed, which creates the political space for an iron-willed parent-surrogate Party. How- ever, the traditional Leninist model of crisis, consciousness, Party, and revolution is both voluntaristic and deterministic. The model suffers from voluntarism because it offers no real theory of historical conjunctures which permits the Party to grasp real as opposed to imaginary revolutionary possibilities (Beilharz, 1 979).30 This failure is rooted in a lack of understanding of the contradictory nature of worker struggles in the past in general, and of the problem of working-class composition/ recomposition in particular.

Leninism suffers from determinism because (as Beilharz reminds us) it makes a deterministic connection between crisis and consciousness, and another deterministic connection between consciousness and Party-building. As one commentator states the thesis, in periods of mass unemployment and impoverishment, the proletariat could only realize their immediate interests by abandoning them and strugghng for their real interests, the abolition of capitalist production relation^'.^' In the words of another, in bad times when the worker comprehends that under capitalist production he is degraded to the status of a mere object, of a commodity, he ceases to be a commodity, an object, and becomes a subject (Avineri, 1971, 148).

The idea that workers suddenly change from a collection of individuals who sell labour power in the market to a social and political class which abolishes the market for labour power raises a crucial question. How do the workers know that they can realize their economic interests only by abandoning them for revolu-

29 Sholomo Avineri (1971, 149). Marx himself wrote that it is clear that the arm of criticism cannot replace the criticism of arms. Material force can only be over-thrown by material force; but theory itself becomes a material force when it has seized the masses (quoted in Avineri, 1971, 139). 3 0 The problem of voluntarism doubtless was the main factor giving rise to the theory of economic breakdown or collapse, which Rosa Luxemburg considered to be the cornerstone of scientific socialism. Without economic crisis and ultimate capitalist breakdown, socialism ceases to be objectively necessary. As has been often pointed out, there are definite religious aspects to this kind of thinking. The theory itself is supposedly scientific insofar as it dis- covered and obeyed historical laws; it is religious in the sense that communists accepted these laws on faith. Some say the writings of Rosa Luxemburg will evoke the same kind of devotion as those of Saint Teresa of Avila (Jod Madtiegui quoted in Baines, 1972, 110). I Review of Herbert Marcuse, Counter revolution and revolr, Boston, 1972, Telos 13 (Fall, 1972), 149.

James OConnor 3 19

tionary political action? This question has been answered in various unsatisfactory ways. Karl Korschs solution to the problem of working-class consciousness lay in the analysis of the relationship between bourgeois thought and marxist theory. He argued that one condition for the accumulation of capital and capitalist society generally is the general acceptance in the society of pre-scientific and bourgeois- scientific consciousness (Korsch, 1970, 78). In this view, capitalist relations of production cannot exist without hegemonic capitalist thought. According to Korsch, dialectical marxism is characterized by the coincidence of consciousness and reality. A major component of a theory of social revolution is the marxist critique of bourgeois science and consciousness. By laying bare the reality of capitalism and exploding bourgeois truths, marxist theory creates a rupture between reality and consciousness, and hence permits changes in material reality. In this way, Korsch explained the failure of revolution by claiming that it was impossible for the workers movement to assimilate marxist theory because of the disjuncture between the theory itself, which was based on mid nineteenth-century working-class practice, and late nineteenth-century proletarian practice.

George Lucaks also stressed the importance of the reform of consciousness when he argued that the working class adopts a revolutionary class consciousness only when it becomes self-conscious of its actual activity and the results of this activity. But this does not occur spontaneously because commodity relationships are too pervasive and bourgeois hegemony is too totalizing. Certain that reform is more difficult during crisis periods because the crisis-ridden condition of capitalism makes it increasingly difficult to relieve the pressure from the proletariat by making minute concessions Lucaks was equally certain that an ideological crisis of the proletariat . . . manifests itself on the one hand in the fact that the objectively extremely precarious position of bourgeois society is endowed in the minds of the workers with all its erstwhile stability and in many respects the proletariat is still caught up in the old capitalist forms of thought and feeling (Lucaks, 1971, 310). The solution is the Party, the task of which is not only to develop and disseminate the theory of capitalism and crisis but also politically to lead the working-class struggle. The subjective conditions for revolutionary proletarian consciousness revolve around the development and dissemination of Marxs theory of capital and Party-building. The objective conditions for revolutionary consciousness consist of crisis hardships, during which there occurs an upsurge of spontaneous activity by the masses. In Hobsbawms words, structure and situation interact, and determine the limits of decision and action; but what determines the possibilities of action is the primary situation. At this point the analysis of forces capable of mobilizing, organizing, and moving into action groups of people on a politically decisive scale (e.g., the Leninist Party), becomes relevant (Hobsbawm, 1975,12).

Western marxism took another turn with the failure of the worker uprisings of the 1920s. The Dutch Council Communists (Anton Pannekoek and Herman Gorter) explained the failure of revolution not in terms of wrong objective conditions but rather in terms of the deep dependence of the working class on bourgeois institu-


tions such as the press, schools, church, etc. Antonio Gramsci, of course, developed the idea of bourgeois ideological hegemony and the problems this posed for the working-class movement more profoundly than anyone else. At one stage in his career, even Lucaks argued that all bourgeois institutions should be in effect boy- cotted because active participation would reproduce reified bourgeois thought and sensibilities within the proletariat. Some marxist theorists argued the extreme position that workers needed to engage in participatory struggles not only in work, community, and cultural fields, but also within the leninist vanguard parties themselves - an idea which Lenin ruthlessly criticized in Left wing communism: an infantile disorder (1920), but which has survived in elaborated forms of criticism- self-criticism and struggles against sexism, racism, national chauvinism, and elitism in revolutionary organizations today.

V Neomarxist crisis theory

Twentieth century historiography and social theory have conspired to weaken or destroy traditional marxist concepts of crisis and consciousness, rebellion and Party organization, reform and revolution. At the level of economic and political struggle, the idea of a standard revolutionary situation in which an economic catastrophe raises the desperate and rootless poor against their betters . . . has probably disappeared forever . , . economic crises are only likely to stimulate rebellion under very special circumstances: when they place the powerful in the position of withholding or extracting resources from organized groups of persons who have established claims on these resources (Lees and TiUy, 1972, 4). At the level of theory, the methodological premises of traditional leninism have been shown to be unsound. Critical theory argued convincingly that work and material existence are only one mediation between human beings and their environment. Adorno and Horkheimer in particular showed that human consciousness has a constitutive role in the construction of social reality, hence that human emancipation cannot be based solely or even mainly on objective economic conditions and roles. The connections between economic crisis, consciousness, and social action are in fact mediated by social concepts at different levels of human experience. The word crisis is soaked with social, political, and cultural meanings.

One basic reason is the fusion of economic processes and normative-cultural and political processes characteristic in political capitalism and the modern social factory, in which science, art, family, and culture generally are deeply implicated in the process of capitalist accumulation. This interpenetration of economy,politics, and culture obliterates the traditional distinction between objective economic laws, political subjectivity, and cultural life.

Jurgen Habermas has been the most outspoken neomarxist exponent of this view that the laws of the economic system are no longer identical to those ana- lyzed by Marx because of interference from the political system hence creating the need for a new theory of the interaction of economic, politics, and culture

James 0 Connor 32 1

(Bolaffi, 1979, 168). In his work, Legitimation crisis, Habermas states that to conceive of a process as a crisis is tacitly to give it normative meaning - the resolution of the crisis affects a liberation of the subject caught up in it. As we saw, in traditional marxism subject means capital understood as a systemic historical process. Liberation therefore means successful crisis-induced capital restructuring and the restoration of conditions of capitalist accumulation. Traditionally, subject also means working class understood as self-conscious, organized, and combative human subjectivity during economic crises. Liberation in this sense means social and political revolution. Liberation construed in this way means not only freedom from the pain and suffering which are invariably associated with c r i~es ,~ but also liberation from passivity and powerlessness, threats to individuals social identity, and loss of what it is possible to accept in a matter-of-fact way. These latter meanings of crisis as an ordeal underwrite a neomarxist concept of working-class liberation because powerlessness, lack of identity, and absence of what can be taken for granted are normal conditions of working-class life, which crises merely exacerbate. Liberation from the pain and suffering of unemployment, economic insecurity, low wages, etc., alone can be effected, however temporarily, precisely by the restoration of capitals normal sovereignty, i.e. renewal of profitable accumulation conditions.

Habermas demonstrates in a convincing way that working-class liberation defined in terms of social identity, social practice, and social power cannot be dis- cussed intelligently within the framework of the theory of capitalist accumulation defined as a variety of systems theory, however dialectical its method and however sharp the difference between bourgeois systems theory and marxism. Systems are not presented as subject, Habermas writes, rejecting the objectivist viewpoint of systems theory, but . . . only subjects can be involved in crises . . . only when members of society experience structural alterations as critical for continued existence and feel their social identity threatened can we speak of crises. Distur- bances of system integration endanger continued exirtence only to the extent that social integration is at stake, that is, when the consensual foundations of normative structures are so much impaired that society becomes anomic. Crisis states assume the form of the disintegration of social institutions (Habermas, 1975, 3, italics added).33

Habermass radicalized Durkheimian approach to crisis theory distinguishes between system integration and social integration and in this sense is a radical improvement on traditional marxist objectivism and determinism. System integration occurs when system functions are integrated into one another. Social integration exists when individuals are normatively integrated into particular functions and hence fulfd expected social roles. Orthodox marxist theories of

Sennett (1977, 171). This is echoed by John Keane who writes that the truth 6f the old crisis theorum remains, the renewal of subjectivity continues to depend on the decay of this systems objective structure and signification (Keane, 1979, 188). This is also echoed by Daniel Bell (1979) who stresses not social institutional disintegration but the absence of any deep-rooted morality or belief system which is thought to threaten capitalisms survival most profoundly.


economic crisis defined as systemic ruptures in the circuits of capital exemplify system disintegration. These occur when there is insufficient money capital to advance for constant and variable capital; or when there is insufficient labour power or means and objects of production from the technical or input-output point of view; and/or when there is insufficient money in the form of revenues to realize total values produced. In contrast, theories of economic crisis defined as ruptures in the capital circuits which are intentionally or unintentionally produced by direct working-class action exemplify social disintegration, which may or may not result in system disintegration. These occur when the wage struggle interrupts the money circuit of capital; or when sabatoge, slowdowns, or refusals to permit technological change, interrupt the productive circuit; and/or when self-reduction of prices, rents, mass theft, consumer boycotts, etc. interrupt the commodity circuit. If we imagine crises travelling through the circuits of capital which in tlus sense function as vehcles or avenues of class struggle, we would see a combination of systemic and social disintegrative processes, which may or may not reinforce one another. For example, worker struggles may be system-stabilizing or destabi- lizing. Wage struggles may resolve systemic problems of value realization. Self- reduction of prices may help resolve credit crises and inflation. Stoppages in production which reduce the amount of capital which is needed to be advanced may help resolve liquidity problems. And so on.

This kind of approach to crisis theory can delineate logical possibilities of crisis but little else. Even if the model is enlarged to include not only shortages of money capital, labour power, and effective demand but also fiscal resources, political and administrative resources, motivations, etc. only logical possibilities present themselves. For example, fiscal deficits may or may not activate motiva- tion or legitimation deficits. Profits deficits may or may not activate fiscal shortages. Reduced capacities for administrative rationality or economic steering may or may not reinforce fiscal and profits shortages. And so on. However, in the same way that ruptures in the circuits of capital may be conceived as systemically produced or created by working-class intervention, administrative capacity and rationality, political legitimacy, motivations, and so on may be conceived in terms of capitalist logic or within the framework of emancipatory practice. Yet the difference between such practice within the circuits of capital on the one hand and within the state and cultural processes generally on the other hand is very pro- found. The wages, hours, working conditions, and price struggles occur within the logic of capital valorization. By contrast, in the course of social and political struggles substantive rationahty confronts capitalist technical rationality; legitimation within workingclass movements confronts state legitimation; social motivations confront individual motivations.

These kinds of formulations of crisis theory, which a reading of Habermas inspires under present crisis conditions, are a definite improvement over marxist objectivism, but they lead to dead ends because they do not break sharply enough with traditional marxism, which remains rooted in nineteenth-century conditions of capitalist accumulation. In fact, the structural-functionalist presuppositions of

James 0 %onnor 323

this approach unexpectedly reinforce orthodox marxisms theory of capital logic. Habermas, for example, believes that there are emancipatory possibilities within crises only in spheres of life not yet totally penetrated by capital. (Bolaff, 1979, 171). Symmetrical and more expressive forms of interaction are possible only within newly proletarianized sectors, youth cultures, marginal workers, oppressed minorities, and above all within the womens movement. Habermas assumes that the working-class classically defined is subsumed under capital not only within the labour process but also culturally and politically. He therefore fails to grasp capital and class struggle as a living contradiction, in other words that all activity is both symmetrical and asymmetrical, expressive and nonexpressive. His formu- lation loses sight of the crucial fact that real life communication exemplifies neither the domination of capital over labour nor emancipation and freedom but rather both simultaneously, i.e, that real communication and social interaction in class society is characterized first and foremost by the ambiguity of language and action. This is why social theoretical decoding methods should be central to crisis theory. It is also why both marxist orthodoxy and Habermass neomarxism separate economic from social-political theory. In the Party, economic crisis theory remains in the hands of specialized economists while political theory remains the monopoly of the Central Committee. In Habermass world, subjectivity is reintroduced at the level of analysis of the social relationships of production, but economic theory remains separate and at the limit purged from the study of sociology or historical materialism. At bottom, traditional marxism and the Habermas school share the view that crises occur because of systemic contradictions of capitalism which subsequently become preconditions for either the restoration of capitals domination of society or emancipatory social transformation. The possibility that crises are socially constructed rather than systemically created underscores the limitations of the medical model of crisis in which there is no room for the human subject to create his or her own crisis (at least not in terms of the external germ model of disease). It also underscores the limits of radical Durkheimianism which stresses that crisis is a process of destruction and construction, challenge and response, of unsettling anomaly and nascent attempts to proliferate interpretive responses which subvert the old normality (Keane, 1979, 184).34 As we have seen, the reason is that this kind of thinking grasps opposing logical possibilities above, rather than contradictory r e a l i t i e ~ . ~ ~ This is exemplified in Habermass definition of crisis in terms of possibilities of new speech situations which can create normatively grounded consensuses, which however are not shown as actually being accomplish- ed in everyday life. Finally, this kind of crisis model is oriented more to thoughts and feelings than to social p~actice.)~

As Keane says on the very next page, this can be applied to capitals strategists too. With reference to social processes, this means . . . that the disintegration of the natural attitudes of those who have become objects of system paralysis promises a self-consciousness of this objective paralysis and perhaps active attempts to overcome it (Keane, 1979). 3 6 . . . Images of crisis are intermeshed inextricably with a daily life which tends to produce apathy, fear, meaninglessness and hopes and desires for a better world (Keane, 1979).

324 m e meaning of crisis

VI Crisis as class struggle

The alternative view of crisis is that modern accumulation crisis tendencies are not the result of systemic contradictions of capitalism, but rather originate in the emancipatory practices of human beings. In this model, crisis defined in social- scientific terms means that the formation of needs, modern forms of capitalist competition, politics, state structures and policies, and working-class practice in the broadest sense are in effect permanent barriers or limits to capitalist accumulation. Crisis defined ideologically is an element in capitals counterattack on the working-class offensive against the law of value. Alain Touraine, for example, argues that the concept of crisis is ideological when it is inappropriately substi- tuted for the concept of transformation of the technical and administrative appara- tus and political system by social movements seeking forms of self-management (Touraine, 1977). In this event, crisis is an element in ruling-class ideology because it calls for the top down reorganization of society. The popular fusion of social- scientific and ideological concepts of crisis means, first, that there develops a kind of permanent crisis consciousness which exists independently of capitalist laws of motion, and, second, that crisis itself means class struggle.

The possibility that crisis means class struggle in the modern epoch has its roots in Council Communism and other workerist tendencies, including the Auronomiu tendency in Italy, movements of oppressed minorities in the imperialist countries, national liberation struggles, womens struggles, and the new left.37 Manuel Castells, for example, states that modern economic crisis is caused by a general process of social disruption in the most advanced capitalist societies (Castells, 1980, 5 ) . ) O Social disorganization has called into question the structure of social relationships underlying the pattern of capital accumulation. . .and triggered the structural tendencies toward a falling rate of profit. This line of attack on the problem of crisis is a vast improvement over marxist orthodoxy because it links social structure and social organization to economic crisis generally and the profit rate in particular.

The problem with this approach is that it fails to develop the relation between processes of social disruption and dialectically related processes of social re- construction. This means that social institutions do not simply disintegrate but instead are subverted or destroyed by new institutions, however informal or fleet- ing. Society becomes not simply disrupted or anomic or normless but rather is torn by completing and contradictory norms. Social integration per se is not at stake but rather what kind of social integration governed by what kind of norms, goals, and practices. This concept of crisis restores the dialectical unity between objectivity and subjectivity or between theory and practice, hence it permits

A summary of the history of the idea that capital means class struggle can be found in Cleaver (1979).

. . . we do not see the theory of class struggle and the theory of the falling rate of profit as contradictory but as complementary. This is because the f i s t explains the effects of society on capital and the second the effects of capital on society (Castells, 1980, 25).

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us to grasp crisis as the development of new social and political practices which threaten existing social relationships, social structures, etc. Crisis defined as turning point exists when new power centres confront existing structures of domination; when individual identity is split between contradictory premises; when it is generally unknown what can be taken for granted or expected from both existing and emerging institutions, organizations, social practices, and roles. Crisis defined in this way has weak status in orthodox marxist thought and most varieties of neomarxism, and no status whatsoever in bourgeois thought because within its un- dialectical problematic new social relationships are grasped as building on, gradually replacing, or adapting to older relationships and practices. The usual claim is that boundary lines between older and emergent social processes, values, norms, and so on are blurred by processes of mutual adaptation or mystified by only apparent resemblances between old and new.

A social-scientific view adequate to the task of comprehending the present crisis is to interpret the roots of both decadent or blocked social processes and emancipatory possibilities as lying in the same human critical practice. Crisis is therefore not anomie or social disintegration but social struggle and social reintegration. This crisis definition is faithful to historical fact because when crises defined as threats to older social relationships break out, social classes and class fractions which cling most tenaciously to old premises and material and ideological resources fight back most violently, in this way creating conditions for historical ruptures. Struggles ensue in which old power centres try to reinforce and defend structures of domination and control. The greater the threat from new centres of power, ceteris panbus, the greater the resistance thrown up by the old centres of domination. This is why the essence of crisis is not social disintegration but social struggle. As Marx, Engels and Lenins political writings suggest, it is only the resistance of the established social powers which test fully the strength of emerging social powers. When new social forces strengthen themselves through struggle to overcome the hardening resistance of old power centres, there develops a conjuncture during which the old social relationships may be restructured. On the other hand, old power centres may succeed in smashing or taming the standard bearers of the new social practices, which may even be adapted to the needs of the existing dominant social relationships. In either case, the struggles of old powers to defend themselves by reinforcing their particular structures of domination are themselves costly. Social struggles which constitute crisis moments in which objective and subjective processes apparently collapse into a single combat, but which remain structurally distinct in the social and individual unconscious, invariably raise the materials, ideological, and political ante. Gains and losses are co

The meaning of crisis

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