Friday, 30 August 2013

Marx & Engels' Theories Of Crisis - Part 10

The Abstract Theory Of Crises (9)


The Role Of Money As Means Of Circulation and of Payment – cont'd


The first form of crisis described, that of a crisis arising from the separation of production and consumption can occur where money acts only as means of circulation, but the second form of crisis where money acts as means of payment cannot arise without the former.

“These are the formal possibilities of crisis. The form mentioned first is possible without the latter—that is to say, crises are possible without credit, without money functioning as a means of payment. But the second form is not possible without the first— that is to say, without the separation between purchase and sale. But in the latter case, the crisis occurs not only because the commodity is unsaleable, but because it is not saleable within a particular period of time, and the crisis arises and derives its character not only from the unsaleability of the commodity, but from the non-fulfilment of a whole series of payments which depend on the sale of this particular commodity within this particular period of time. This is the characteristic form of money crises. 

If the crisis appears, therefore, because purchase and sale become separated, it becomes a money crisis, as ‘soon as money has developed as means of payment, and this second form of crisis follows as a matter of course, when the first occurs.” (TOSV2 p 514)

This is why theories of crisis based on the role of credit, as money and means of payment, are wrong because, although this potential can be the spark that ignites a specific crisis, and can exacerbate any actual crisis, the real potential lies elsewhere, in the separation of production and consumption.

“In investigating why the general possibility of crisis turns into a real crisis, in investigating the conditions of crisis, it is therefore quite superfluous to concern oneself with the forms of crisis which arise out of the development of money as means of payment. This is precisely why economists like to suggest that this obvious form is the cause of crises. (In so far as the development of money as means of payment is linked with the development of credit and of excess credit the causes of the latter have to be examined, but this is not yet the place to do it.)” (TOSV2 p 514-5) 

But, although these are two forms of potential crisis neither are in themselves the cause of any particular crisis.

“.. the real crisis can only be educed from the real movement of capitalist production, competition and credit ...” (TOSV2 p 512)

David "Campo" Cameron, George "Foggy" Osborne, and
Nick "Cleggy" Clegg.  The Last of the Summer Whine.  Their
Talking down of the UK economy, and ridiculous comments
that Britain was in as dire a state as Greece, undermined
confidence even before their austerity programmes sent it into recession.
In other words, if we want to know the cause of any particular crisis we have to analyse that crisis in its specificity. “The truth is always concrete.”

Specific crises can arise from significant changes in prices that do not reflect changes in value. For example, when the Liberal-Tory government continually said that Britain was in as bad a state as Greece, this caused consumers to cut back on their spending, and firms to reduce their investment, concerned at hard times ahead. To put it in the terms that Marx used earlier, people decided that the commodity they wanted relatively more than others was money itself.  In times of uncertainty that is inevitable, because it is only money that can be used as a general equivalent form of value. Consumer goods producers were left with unsold commodity-capital, and fixed capital producers in a situation of over production, as firms cut back on investment and even replacement of equipment. Market prices fell even though values had not changed.

That has to be clarified.  The values of commodities had not changed.  The labour-time required for their production remained what it was before.  If anything, the loss of productivity due to lower economies of scale as production was slowed, would have increased values.  But, the value of the total commodity-production is also determined by the socially necessary labour-time, which itself is a function of the level of aggregate demand.  If the level of output remains constant, but the level of aggregate demand in the economy falls, then it is obvious that some of the labour-time expended was not socially necessary relative to the previous position.  Consequently, this is not a case that breaches Marx's requirement that the total of values equals the total of prices.  Market prices fell as aggregate demand fell.  But, the total value of commodities also fell by the same amount because some of the labour-time used in their production was shown not to have been socially necessary at this lower level of aggregate demand.  That does not change the labour-time required for the reproduction of those commodities, and it is precisely in this fact that one of the causes of crises lies.

So, capital was destroyed. However,

“In so far as crises arise from changes in prices and revolutions in prices, which do not coincide with changes in the values of commodities, they naturally cannot be investigated during the examination of capital in general, in which the prices of commodities are assumed to be identical with the values of commodities...

The general conditions of crises, in so far as they are independent of price fluctuations (whether these are linked with the credit system or not) as distinct from fluctuations in value, must be explicable from the general conditions of capitalist production.” (TOSV2 p 515)

Back To Part 9

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