“The credit system appears as the main lever of over-production and over-speculation 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 large part of the social capital is employed by people who do not own it and who consequently tackle things quite differently than the owner, who anxiously weighs the limitations of his private capital in so far as he handles it himself. This simply demonstrates the fact that the self-expansion of capital based on the contradictory nature of capitalist production 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 are continually broken through by the credit system. Hence, the credit system accelerates the material development of the productive forces and the establishment of the world-market. It is the historical mission of the capitalist system of production to raise these material foundations of the new mode of production to a certain degree of perfection. At the same time credit accelerates the violent eruptions of this contradiction — crises — and thereby the elements of disintegration of the old mode of production.” (p 441)
In other words, the underlying cause of crises of overproduction is that capital continually expands its technical capacity to produce more and more use values. But, this capacity grows faster than the capacity to absorb all these use values at prices that reproduce the capital consumed in their production. Crises temporarily resolve this contradiction by devaluing capital. Meanwhile, new types of use value are developed so that excess capital is absorbed in their production, and new markets thereby expand for their consumption, until the limits are reached once more.
Under the monopoly of private capital, the degree to which expansion of production occurs is limited, because, as the rate of profit falls, the private capitalist is more likely to exert caution over extending production further, because they will be keen not to lose their capital. But, for socialised capital, control rests with the professional manager, who may be more concerned with expanding the business, and their empire within it. As the professional manager is paid wages, and as the shareholder receives interest on their money-capital, which may expand in mass, by a greater amount than it falls as a rate, there will be a tendency to keep expanding production, even when the rate of profit falls to very low levels. Credit facilitates this process.
“The two characteristics immanent in the credit system are, on the one hand, to develop the incentive of capitalist production, enrichment through exploitation of the labour of others, to the purest and most colossal form of gambling and swindling, and to reduce more and more the number of the few who exploit the social wealth; on the other hand, to constitute the form of transition to a new mode of production. It is this ambiguous nature, which endows the principal spokesmen of credit from Law to Isaac Péreire with the pleasant character mixture of swindler and prophet.” (p 441)
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