In the 1848 Manifesto of the Communist Party, Marx mentions
the commercial crises that by their periodical return put on trial, each time more threateningly, the existence of the entire bourgeois society. ... In these crises there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity - the epidemic of over-production __ And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented.1
Though Marx will develop his crisis theory at length in other, later works, and particularly in Capital, the essential moments of his argument are already present here.2 These moments are: ( 1 ) empirical observation of a single commercial crisis; (2) overcoming singular or idiosyncratic aspects of this crisis in order to link it to a series of cyclical crises; (3) charting a causal path between features internal to capitalism and these recurrent crises, thereby refuting the objection that crisis results from accident, from features external to capitalism, or that it can be controlled while remaining within the capitalist mode of production; and, finally, (4) suggesting that commercial crises will worsen as the mode of production known as capitalism develops.
Following this argument, economists influenced by Marx's crisis theory meet the advent of a new, empirical commercial crisis with an utter lack of surprise and rapidly begin the theoretical work of linking it to other economic crises. Some even attempt to predict when a crisis will again occur.3
From Marx's perspective, crises are simply inevitable, given the causal and structural features of the capitalist mode of production. The questions are: when will they happen, what will be their worsening features, and how can capitalism be eliminated?
History has a way of asserting itself definitively, but only briefly. Our memories are not strong, particularly when the patterns to be charted exceed the imaginative threshold of a single human lifetime. In addition, the static modeling features of mainstream economics, combined with a positivist methodology inherently opposed to conceptual scrutiny, jointly militate against the kind of longitudinal and structural analysis that Marxist crisis theory mandates.4 Insofar as we react with naïve surprise in acknowledging any given economic crisis, we will only ever discover solutions to crisis that, in the words of Marx, "pave the way for more extensive and destructive crises."
However, to understand the inner logic of the mode of production known as capitalism, we will have to detour through the history of a discipline that has been lost, particularly in North America: political economy. The essay therefore proceeds in five sections:
I. A brief history of this lost discipline and Marx's place in it.
II. A discussion of periodic economic crises, such as the Great Depression of the 1 930s and the Great Stagflation of the 1 970s, along with a documentation of the resurgences in crisis theory that have accompanied these historical events.
III. An argument that recurrent economic crises have a common source in a feature that, according to Marx, is structurally endemic to capital: the fall in the rate of profit.
IV. A consideration of the 2008 economic crisis in light of these reflections; and, in conclusion:
V. A broader treatment of the notion of crisis outside of the confines of commerce.
I. Political Economy
Though the term "political economy" derives from a cluster of French thinkers associated with physiocracy, perhaps the most important figure in the early years of the discipline was Adam Smith. Smith wrote two very famous works: A Theory of Moral Sentiments (1759), a work of moral theory, and An Inquiry into the Nature and the Causes of the Wealth of Nations (1776), the classic foundational work of political economy. …