MSZ (October 1982)

What is a Crisis?

The fact that an economic crisis is taking place is recognized by everyone. But this is the only point in which the following article agrees with the professional and amateur observers of the scene. We consider the views in circulation concerning what a crisis is, what the particular character of the present crisis is and which necessities “we” are “all” therefore subjected to, to be completely incorrect. According to the political goals of the relevant ideologies, the latter are nothing but ways of justifying the governments’ order of the day, which is what imperialist democracies constantly stand up to.

The real business of a free market economy, the accumulation of capital, no longer functions. Its past success has led to an accumulation of goods, money and means of production. This wealth, which was accumulated according to all the rules of the art of exploitation – some rationalization, lots of foreign workers, cheap women’s hands, extra shifts and short time phases, oriental day laborers, the ruined health of some shifts, etc. all made their contribution – this wealth has one crucial shortcoming for its owners and expert administrators. It can no longer be used, at least not according to business standards. Of course people could be found to make use of a bankrupt company’s machinery, or drive around in the cars on stock, or acquire one or two luxury items available in the market economy bazaars with the money in the bank accounts, if it was theirs. But that is not what all these things are intended for; they are meant to serve growth. This result – in terms of money – obtained by investing, producing, buying, saving, exporting, importing, is no longer to be had, according to reliable “business” sources.

The relevant persons are very well able to distinguish between this state of affairs and an occasional failure which is part of capitalist competition. It is by no means a “crisis” when a company happens to miscalculate and maybe even go bankrupt, which is always attributed to mistakes and the negligence of its managers – “mismanagement” – afterwards, when its products have already been compared with other companies’ products on the market. A failure leading to the elimination of a competitor may quite well mean the beginning of a boom for those who take possession of his property. Some businesses are profitable with such reduced costs, even when their original owners could not make any profit, any margin over their costs. Not to mention the basic advantage that the ruin of a competitor on the market itself offers a better business situation for the “healthy” companies.

However, in a crisis failures do not count as inevitable setbacks in capitalist competition, but rather as “signs” – of a general decline in business. Those people who are called “business” notice on the basis of various competitors’ problems that they cannot profit from their elimination, but rather must see to mastering the difficulties of “the market,” “stagnating orders,” etc., themselves. The business world notices that production for the market, which everyone appreciates as being the sphere in which his products can be turned into profit, has been accelerated heedless of the limits of the market. Because the conditions for production have become separate from the realization of the products’ value, the means for doing business – the instruments of production, goods, manpower – are suddenly useless.

However, the business world is not willing to see that the overproduction of capital – the accumulation of too much wealth in relation to the purpose of accumulating more of it – is entirely thanks to them. They always know how to blame the “competition” for the miserable situation, and they don’t mean the competitive action of all participants – including their own – they mean everyone else. Times of crisis foster the expert search for the guilty party: none of the otherwise so highly respected characters is above suspicion, from the managers up to the government, which really did everything it could to promote business conditions for its favorite dynamic citizens. And captains of industry and statesmen unite to detect foreign troublemakers – the Japs sell their things too cheap, the oil sheiks too expensive, the French too much – as though the capitalists of this world differed according to criteria of fairness when they practice their sublime art of free enterprise. The wage earners get told regularly that their own costs have climbed too high, conflicting with public morals – so that finally no one likes to think of who it is that incessantly overtaxes the solvency of the entire society with his so irreproachable interest in profit. People who consider nothing more normal than to try to bag larger shares of the market by enlarging their capital, by increasing their productivity; people who calculate their turnover to compensate the reduction of profit in proportion to their capital advance; people who, in order to succeed in competition and production, throw as much of everything on the market as possible, as cheaply as necessary, and, on the other hand, consider themselves unable to do anything as buyer for the consumption power of the rest of society, especially those dependent on their wages; such people immediately complain in times of crisis about other people ruining their business even though they never had any preferential treatment from the government. They do not hesitate whatsoever to state openly what the criterion is which causes both consumption and production to stagnate in “hard times”: their profit. “Under these circumstances, no risk is worth it …”

The scholarly economists deal with the overproduction of capital in a more general way, emphasizing their duty to worry about the success of the market economy. They invent the term “underconsumption” for the fact that too little is bought for the needs of property bent on increasing itself. They transform the fact that there is too much in one place and too little in the other into the theory of “disproportion,” without bothering about what there is too much or little for. “Psychic processes,” “innovations” accumulating periodically, “the time factor” itself, the influence of “sun spots” on the harvest, are all just as useful for crisis theory as the claim that “the” economy is a “system of oscillations” for which many a fine mathematical model can be set up. This last kind of theory is at least honest enough to wipe out any reminder of what actually comes into conflict with what when business stops functioning in capitalism – a reminder which somehow can’t help arising when crisis phenomena are transformed into their own explanation.

We conclude this review of the ideological way of dealing with the crisis by paying tribute to the objection which is sure to be popular among Leftists. This objection is simply that the talk of overproduction is “oversimplified” and the real crisis events of today can not be explained in the banal way that “classical” Marxism was allowed to use in its day – the matter is “complex.” Apart from the fact that “complex” is not an attribute of anything at all, let alone an explanation – but rather the self-admiration of modern scholars who regard their efforts as something sublime (since it is “not easy” to explain their subjects, the subjects themselves receive the compliment of being “complex”) – this know-it-all point of view, which is not interested in knowing anything, simply denies the fact that none of the many “causes” and “factors” of the crisis could have any effect at all if the criterion of capital (which is then violated) did not exist.

Competition and Credit

“...the real crisis can only be explained within the real process of capitalist production, competition and credit.” (Marx, Theories of Surplus Value, ch. 17)

When denying the real explanation of the crisis, both the ideologists of who is to blame and the multi-factoral model-constructors of constant growth need not take the trouble to answer the question which arises for a theoretician in the face of overproduction: how does a certain class that for the sake of profit only allows for production for the market manage to maintain production heedless of the existing limits of the market or of effective demand? The crisis, after all, bears evidence of the fact that the same businessmen who calculate so minutely with every wage penny and always knows just how much “the economy” can take, “live beyond their means” themselves in one very basic sense. They treat the market, the effective demand of society, as their prerequisite and their assured means which they can make use of by constantly increasing immediate exploitation. The “only” problem they have when increasing their wealth seems to be the competition – as if limiting the growth of others (and quite generally of the wage-dependent class) did not reduce the conditions for realizing their wealth as well!

Although the crisis refutes the idea that the market always guarantees profit to a clever capital who knows the ins and outs of exploitation, rationalization and the timely expansion of his production, this idea is put into practice daily in every situation in which credit serves as a lever for doing business:

• capital “clears” a market hurdle even with the simple forms of credit based on a promise of payment. The continuity of returns from capital that has been invested is not to be endangered by limits of solvency due to time or place.


• so that debts circulate in the realm of commercial credit as if they were money. Due to the trust in the debtor's business success, his momentary lack of solvency is treated as if a successful sale were being performed. In addition to the negative relationship existing between competitors, they are now dependent upon each other as creditor and debtor in a positive sense in that they depend upon the others’ success in business. However, in this case individual persons or companies either vouch for or endanger the success of the other party’s transactions.


• as soon as debts are treated not only as money but also directly as capital – i.e. when credit is taken up to start up a profitable venture or allow for expansion for the (continued) competitiveness of a company – the whole picture of “clearing market hurdles” changes. Lack of liquidity becomes a positive means of doing business: the banks, which administer the liquid means – assets as well as liabilities – of the entire society, in turn “supply” the business world with credit and allow them to make use of all of society’s money as if it were their own private capital. Interest is charged regardless of whether the debtor makes his expected profit or not – so that many a sum of money exists twice, each time as a claim on its own accumulation. The real accumulation of wealth is thus accompanied by a fictitious accumulation, whose agents pride themselves on being of service to the competitors engaged in real accumulation.


• the individual capitalists not only accept this service, they develop it into competition for credit as well. Continued competitiveness in the fight for markets to assure the profitability of one’s own assets against the others depends on the size of one’s disposable capital. Capitalists organize themselves from the start in credit unions in order to overcome the barriers set by their private assets, as far as the scope of their production process, the amount of credit they are granted and the ease with which investments can be deviated into profitable sectors, are concerned. By merging into joint-stock companies their assets are given a profitable function which they would not be capable of otherwise; by giving up their independence, by combining with other people’s property, these capitalists assure the accumulation of their own wealth.

Each time the battle over profitable spheres of investment, over the attraction of credit, is fought – and this is the case in all important sectors of the “industrialized countries” – capital ownership is separated from its economic function. But this is not only true in the sense that the notorious “achievements” such as abstinence and personal commitment to making gains in production, obviously are not the decisive factor in accumulating property – wage-dependent “co-workers” put these qualities to work for a high paying position on the income ladder. The capital market – trade with securities which are priced according to their returns as compared to the returns of loaned capital, etc. – renders itself independent of its foundation, i.e. the accumulation of surpluses in industrial business. Speculation with securities – which is institutionalized in the stock market – brings about an accumulation of nominal representatives of non-existent, fictitious capital to a much greater extent than in the case of normal bank credit.

For their owners, these titles of property are endowed with the agreeable quality – shared by all other forms of credit – of functioning like money. Banks, which already excel in acquiring such securities and include them in their assets, are in a position to put much more credit in circulation than without such “assets” which are already categorized as private assets in some accounts – and “supplying society with liquidity,” i.e. solvency, can go its way totally undisturbed by its own material basis. The things that circulate “under the credit system” are tokens of credit, always and everywhere. And the main task of all businessmen, who are called upon to make more money out of their money, can be termed, in accordance with Marx’s M – M’, as “credit – credit’.”

In one way, however, the liberty which the credit structure allows businessman in matters of “limited solvency” or “dependency on the market” is deceptive: the standard for their success still remains the same – a surplus must appear. The solvency produced by the credit, which is thrown into circulation and is as good as money, is there to be made use of, after all – which means against the competition as well as for fulfilling financial obligations towards one’s creditors. The methods of competing on the condition that tokens of credit replace money are just as well known as the consequences:

• competition for the least expensive goods, which mans increasing the relation between costs and output by means of appropriate measures on the assembly line, goes hand in hand with higher bills. Having to be cheaper than the competition does not mean refraining from asking as much as one can get. In this way the business world brings about exactly what it uses as an excuse: inflation.


• this procedure leads to one undeniable success, however. Those people who are not blessed with the possibility of simply demanding more for the sale of their commodity “due to inflation” become poorer. We are referring to those people who sell their labor, who are made to feel the growth of credit circulating in the business world in the form of a lack of “purchasing power” as long as they do not get organized and insist on making their labor power more expensive. They experience the magnificence of credited solvency only as a technically refined variation of the old method of making ends meet – i.e. as “consumer credit”! Instead of being a means to recover one’s losses, this kind of credit just costs money! Debts happen to be either a means of doing business, which is made profitable by increasing one’s funds, or a source of misery.


• in spite of all those nice devices designed to control the price of labor power, the capitalists still have their obligation to society – i.e. making profit, upon which everything depends in a market economy, above all “our jobs.” Precisely because every company is dependent upon the credit it is granted – and the crucial credit-giving institutions, the banks, pay very close attention to their own surplus (fictitious or not) – the company balance-sheet is pretty decisive. A company does not go bust under the credit system first and then lose its good standing. It works the other way around, so that maintaining one’s credit rating has to be proven at all times. This can only be accomplished by showing gains or presenting strategies which offer an edge over the competitors in spite of one's losses. Thus nothing is changed by the fictitious capital that contributes so much to the solvency of society.


• except for the small detail that the failure to make profits, the non-reusability of the returns, the bad order situation, the insolvency, etc., at one point threatens the basis for the entire mafia’s business. The positive dependency which industrialists, stockholders and banks engage in via credit, then makes itself felt: trust (the meaning of the Latin word “credit”) in the success of one party’s business was the guarantee for another party’s business, so that a competitor’s failure decimates the credit volume of a bank, affecting its balance-sheet and thus its own means. Money – even in the shabby form of tokens of credit – becomes scarce.

Overcoming the Crisis

“In a general crisis of overproduction, the contradiction is not between the different kinds of productive capital, but between industrial and loanable capital – between capital as directly involved in the production process and capital as money existing (relatively) outside of it.” (Marx, Grundrisse, p. 316)

The credit system supplies money to every company according to its production needs. The point of departure for all forms of credit is that all money is capital – except when spent for consumption. In all forms of credit the business world relies on the mode of production itself, as if there were absolutely no limits on the success of production and trade, the surplus.

In this way the competing companies claim more and more of society’s wealth for themselves, aided by credit, they continually increase the standard for their private enrichment, capital, which the market is supposed to pay its surplus to – and constantly lessens the effective demand by the very methods of this business: no costs are worth the money if they do not serve a profitable purpose. They stick to this criterion when they stop considering “investment” rewarding and announce to the world at large that “the market has refuted their equation money = credit = capital; and they do not even give it up when they turn to the practical criticism of this state of affairs which is called “crisis.” Their efforts are aimed at restoring the conditions for business – in the name of profit and for the sake of profit – against each other, of course, and always at the expense of the great majority of people who participate in business at most through their labor. Far from being a celebration of the collapse of the free market economy, the following takes place in a crisis:

• the fictitious capital is robbed of its disguise; the deletion of a few zeros on the promissory notes restores the necessary trust in credit.


• the commodity capital, which is put up for sale “unconditionally” due to the lack of effective demand, is either had very cheaply – if a creditor plagued by devaluation hopes to compensate his losses due to reduction of credit by means of upswing deals – or else it just goes to waste.


• the production plants, whose owners lack an “inclination towards investments” and have too little cash to meet their obligations, also change hands at bargain prices. Here too some consolation is to be had for a creditor bank which forfeits fictitious wealth, even if it can only claim some real estate. Now and then, a “relatively” stable competitor can arm himself for the upswing by making a purchase – which is nice for the people who own shares in his company that has now bought out a competitor.


• these people are up for crisis profits, since one can speculate on successful expropriation the same way one speculates on the growth of capital in other cases.

Unfortunately, overcoming the crisis is not restricted to the contraction of credit and connected disputes over expropriation, however. Since expenses are not worth it for a major part of production in view of the contracted market, not only material wealth is sacrificed to the abstract form in which it is counted. Wherever no money is to be made from exploiting labor, the class which lives by selling its labor is refused an income. Capital parts with its usual practice of causing attraction and repulsion of labor according to its changing production needs and starts producing overpopulation: there are too many of those people running around who are dependent on the “blessing” of a profitable job, when the capitalists announce that “bad times” are ahead. So that idyllic scene of capitalism comes about which repeats itself every few years: all the elements necessary for the production of wealth are assembled one next to the other – and are unused, because they have nothing more to offer for the purpose of a free market economy. A host of unemployed people are lamented publicly when they experience that only those who can pay are worthy of enjoying capitalist products – and it is clear that all existing money, and the other stuff as well, can only be put to use to employ the wage-dependent population in the upswing – provided, of course, that these people behave as moderately and modestly as a “dependent variable” is expected to…

Strangely enough, the government is called upon in such times, when the opposition between the honorable business interests of the capitalists and the other side’s need to exist becomes so extremely evident. Not only the capitalists call upon the state to exert its power to restore decent business conditions, so do those who speak up in the name of the workers and their virtuous usefulness. People with a humanitarian and ecological turn of mind, progressive economists and union officials think it is perfectly normal to call on the state when speaking for the working class. In regarding the state as a judge who ought to repeal the verdicts spoken on the wage-laborers, they have no idea of what the administrator of the free market economy has to do with money and credit, wages and poverty.

Government and Crisis

Let us begin with the social welfare system, which people call on to meet its obligations towards the “underprivileged” whenever the victims of the free market economy increase at a conspicuous rate. The state certainly cannot be said to have ever intended to prevent the existence of the “underprivileged” with its measures such as compulsory insurance. On the contrary, it assumes a certain amount of poverty as given and organizes the administration of it. As soon as millions really need this social attention, the state regards it as impossible.

All governments, new and old, consider it a safe bet that any refusal of the wage-laborers to make a sacrifice is a serious threat: in times of boom, it endangers further growth, and in times of crisis, it threatens the necessary upswing. And in all ideological statements of this kind the government is true to the practical task which it takes upon itself. Beyond all the catchy interpretations of politics which the parties use to attract votes, the measures that are sure to be taken are the following:

• protection of competition because growth of private property and its profitable “initiative” are a matter of importance to the government. Its power is based on this kind of wealth at the expense, and through the services, of the wage-dependent majority. It knows it is the obligatory condition for the functioning of the class society, puts the economic “health” of the country and the people under its power in terms of money, which becomes more and provides it with the means for maintaining a functional power apparatus both at home and abroad. On the other hand, whereas it can never afford a budget deficit in order to finance the consumption of the poor, it can always find funds for investments to pay for rationalization, modern methods of exploitation, especially those which cut down wage costs. All this it does for “our industry” that must remain competitive or recover its competitiveness ...


• maintaining the credit system, the lever for the accumulation of capital. The state guarantees not only the proper use of credit in competition, the business of the banks and the functioning of the monetary system with all its hardship for those who use money not as capital but as a means for buying articles for consumption, and have to earn it by their labor. This same government has, based on its power, a monopoly on issuing generally valid tokens of credit, thereby guaranteeing the exclusion from wealth by means of the standard of money and its use as capital – and it makes its use of money as a means for purchase into a source of credit open to the business world. It puts its debts into circulation in the form of bonds or legal titles on the issue of credit – so that it not only keeps a check on and administers the use of debts as capital to promote accumulation, but also supplies its free market economy with the means for its overaccumulation.


• being the political agent for the business success of its favorite citizens, it pays attention not only to the need for credit which arises in the course of business and always becomes apparent in the lively communication between the banks and the Federal Reserve Board, the Federal Reserve Board and the Secretary of the Treasury, the Secretary of the Treasury and the President; the effect of its debts on the exchange rate is of some interest to the government, the ideally existing collective capitalist, as well, as is the interest rate, which draws or repels capital across the borders. It constantly relativizes its credit policy with respect to its national banks and companies in view of the desirable and undesirable consequences of the national debt, inflation, etc., for national business; the criterion for all decisions and alternatives is the success of national capital, which every imperialist democracy is responsible for.

All the bourgeois as well as leftist critics of government measures prove to be confused on this point when they accuse the government of having “failed” to prevent the crisis, once overaccumulation has come about. That is one thing state power is not at all responsible for doing, even though “anticyclical programs” may sound that way for those who are not interested in the economic deeds of state power but, in times of crisis, think the government should see about avoiding trouble as far as the accumulation of capital is concerned. Of course, no government is too pleased about profits diminishing – but it is a peculiar demand to make of politics that it should forget about promoting profit-making since this always involves the danger of a crisis (“overheating”). Politicians themselves know that they are dealing with business cycles and they see their task in making the best of the ups and downs. In any case, it is ridiculous to demand “only ups” – i.e. the ideal which is preached – especially in the name of the sacrifices that must be made by some people, be it boom or depression.

Overcoming crises is a challenge for the class state – but only as a faithful continuation of the services it provides with its power between the crises. The government puts the crisis through by consistently taking sides with a successful use of money and credit, with poverty which is useful in this way – and in the name of the unemployed it calls for an upswing of business; which is what everything depends on in a free market economy, including the existence of those who are made superfluous by business. Isn’t it the social calling of capitalists to create jobs?!