What is “crisis theory” in Marxist economics?
In: Economics
Marx describes producers as people who engage in exchange of commodity for money. He proposed this chain:
M — C — M — C — etc
Producers can enter this chain at the C or at the M circuit. Each has its costs. Each iteration of the cycle wants ever bigger C and requires ever bigger M. As a result he says there is overproduction of C that spills over into crisis in M. In Marx’ words:
>Commodity capitals now vie with each other for space on the market. The late-comers sell below the price in order to sell at all. The earlier streams have not yet been converted into ready money, while payment for them is falling due. Their owners must declare themselves bankrupt, or sell at any price in order to pay. This sale, however, has absolutely nothing to do with the real state of demand. It has only to do with the demand for payment, with the absolute necessity of transforming commodities into money. At this point the crisis breaks out. It first becomes evident not in the direct reduction of consumer demand, the demand for individual consumption, but rather in a decline in the number of exchanges of capital, in the reproduction process of capital.
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