Economic collapses and crises make themselves felt most sharply through spreading instability and sudden declines in stock markets. This also explains why economists are so fond of portraying the outbreak of crises as resulting from speculation in stock markets. Yet, the stock market is, in the final analysis, a mirror of the capitalist economy. Collapses in stock markets are not the causes, but the outcomes of the crisis, just as speculative activities in stock markets are not the real causes of the capitalist boom. As is known, betting and gambling can only change the distribution of wealth between individuals, without increasing the total amount of wealth. In his letter to Bebel, written in 1893, Engels says: “the stock exchange is an institution where the bourgeoisie exploit not the workers but one another. The surplus value which changes hands on the Exchange is surplus value already in existence, the product of past exploitation of labour. Only when that process is finished can the surplus value serve the ends of stock exchange swindling.”[1] In capitalism, any increase in the total amount of value is only possible through creation of surplus value by the working class. It may seem like stock market speculation creates wealth out of mere pieces of paper as if denying the world of reality. But this is only an illusion. Economic bubbles, inflated on the basis of monetary policies or stock market dynamism, are doomed to explode. Ficticious figures are doomed to go down into the world of reality following the outbreak of the crisis.

Aimed at hiding the fact that crises are inherent in the nature of capitalism, hollow justifications and pseudo analyses of economists have been mere rehashes of one another over years. Their job is to obfuscate by attributing inevitable results of capitalism to financial and monetary policies of governments, and thus to keep the system alive. What they adress each time as causes of, or solution to, the crisis are in fact parameters that depend on economic situation such as interest rates. For economists, changes in interest rates can provide solution to the crisis. But the reality is entirely different. As Marx puts it: “Ignorant and mistaken bank legislation, such as that of 1844-45, can intensify this money crisis. But no kind of bank legislation can eliminate a crisis.”[2] Because, capitalist crises do not emanate from incidental flaws in the field of distribution, but rather from the very nature of the capitalist mode of production.

As demonstrated by Marxism, economics is not a scientific discipline, but the ideology of the bourgeoisie, i.e. the political economy. There is no such thing called “Marxist economics”. Marx’s analyses of the capitalist economy are totally a critique of this political economy. In political economy, the reality is presented upside down in the service of bourgeouis ideology. The analyses are brought forward in accordance with the wishes of the capitalist class, far from showing what is actually happening. Yet, the crises in the world market strikingly illustrate the contradictions and antagonisms of the bourgeois production. But, to avoid acknowledging these facts, political economy strives to fabricate pretexts when faced with the reality of crisis. “Instead of investigating the nature of the conflicting elements which erupt in the catastrophe,” writes Marx, “the apologists content themselves with denying the catastrophe itself and insisting, in the face of their regular and periodic recurrence, that if production were carried on according to the textbooks crises would never occur.”[3]

Bourgeois commentators try to present the spasms of capitalist economy as accidental phenomena. But the very nature of capitalism, which makes it doomed to undergo crises, has been perfectly exposed by Marxism. The basic cause that makes economic crises inevitable is, in the last instance, the contradiction between the social character of production and private-capitalist mode of appropriation. This contradiction manifests itself in the disharmony between production and consumption, and in imbalances in different fields. Cyclical overproduction crises are manifestations of problems that lie beneath the capitalist economy.

Above all, the capitalist mode of production contains imbalances in different fields. The balance between different factors has a temporary and occasional character. On this, Marx says: “the working people, can only expand their consumption within very narrow limits, whereas the demand for labour, although it grows absolutely, decreases relatively, to the same extent as capitalism develops.” And he goes further: “Moreover, all equalisations are accidental and although the proportion of capital employed in individual spheres is equalised by a continuous process, the continuity of this process itself equally presupposes the constant disproportion which it has continuously, often violently, to even out.”[4]

In capitalism, the conditions of exploitation and the realisation of exploitation are not two identical phenomena. The former, that is the extortion of ever-increasing surplus value from the working class, is limited to the productive capacity of society, whereas the latter, that is the realisation of surplus value, is limited to the total consumption capacity of society. Therefore, breakdowns in the realisation process of the already produced surplus value lead inevitably to overproduction crises. The limited consumption capacity of the working class plays an important role at this point. But, this factor should not be interpreted in a one-sided and erroneous way. Because, the capitalist mode of production is not dependent on the fullest consumption of the surplus value by its creators, that is workers. The wages already amount to a certain part of the total value created by workers, excluding surplus value. Thus, in the final analysis, purchasing power of the working class is limited to the total sum of wages. In effect, some part of the surplus value is allocated to luxury expenditures of capitalists, and to government, armament and security expenditures that are seen as essential for the maintenance of capitalist state. But essentially, a significant part of the surplus value is channeled into reinvestment. Otherwise, capitalism would not function as an expanded reproduction process. However, since new investments are combined with the effort to increase the productivity, that is to say the rate of exploitation, capitalist operation deepens the gulf between the production capacity and the consumption power of workers. This is an inescapable internal contradiction of the capitalist mode of production.

The medallion hanging around the neck of the capitalist system has the question of overproduction on one side, and the reality of limited consumption which is an expression of the poverty of masses, on the other. As Marx says “The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses...”[5] The significance of this phenomenon does not mean to neglect other factors behind capitalist crises such as the tendential fall of the profit rate, various imbalances etc. Nor does it require regarding underconsumption as the only cause of the crisis. But the reality of underconsumption is included among the factors which underlie the breakdowns in capital accumulation process, and which remain in a dialectical relationship. Besides, one should not misunderstand what Marx objected in the context of debates on underconsumption. Marx criticised those who turned a blind eye to the reality of overproduction advocating that the sole cause of crises was the underconsumption of the working class. For instance, Rodbertus, one of the targets of Marx’s critique, saw commercial crises as the result of the underconsumption of the working class due to low wages. Such an approach is totally erroneous since it means that the crisis can be overcome once the wages rise. Yet, on the contrary, crises occur in periods when wages generally increase. In short, even if wages rose and workers spent all of their wages on consumption goods without making savings, an overproduction crisis would still occur.

Engels pointed out that the underconsumption of the masses had always existed in societies based on exploitation and therefore, although it was a prerequisite condition for capitalist crises, it could not solely explain their causes. The phenomenon which is peculiar to the capitalist mode of production is the reality of overproduction. The market can barely absorb the monthly output of rapidly advancing production within one year, as a wide gulf emerges between the production and distribution processes. Thus, along with other problems peculiar to the workings of capitalism, the possibility of a crisis turns into certainty. In other words, when the preconditions of a capitalist crisis become ripe, there develops an overproduction crisis which would lead to an interruption in the capital accumulation process.

Capitalism is such a chaotic system where production becomes overproduction with anticipation of profit, while the broad masses cannot afford to buy their basic needs. In reference to the inescapable inner contradiction of capitalism, Marx says: “the periods in which capitalist production exerts all its forces regularly turn out to be periods of over-production...” and goes further: “but the sale of commodities, the realisation of commodity-capital and thus of surplus-value, is limited, not by the consumer requirements of society in general, but by the consumer requirements of a society in which the vast majority are always poor and must always remain poor.”[6] Thus, capitalist overproduction does not mean an excess production that emerges despite the balanced fulfillment of all the needs of the society. On the contrary, there is, in fact, a huge deficiency in this respect. “There are not too many necessities of life produced, in proportion to the existing population. Quite the reverse. Too little is produced to decently and humanely satisfy the wants of the great mass.”[7]

No matter what technical advances occur and how much new technology improves order tracking, intentory management, and sectoral production planning, capitalism is not and cannot become a planned economy where production is conducted in accordance with the needs of the masses. Because this is a system that has an anarchic character, where monopolies, conglomerates, and international cartels compete with each other in order to gain a larger share of profits and therefore, seek to undermine each other’s plans. Some economists maintain that the problem of overproduction could well be solved with the help of new technologies. But these arguments are entirely baseless. The capitalist mode of production is grounded on capital’s need for self-expansion. A capitalism that plans or curtails the production according to demand or needs means a capitalism that denies its own nature. Marx says: “The quantity of commodities created in masses by capitalist production depends on the scale of production and on the need for constantly expanding this production, and not on a predestined circle of supply and demand, on wants that have to be satisfied.”[8]

As explained by Engels who perfectly summed up the meaning of capitalist crises, the results of the anarchic nature of capitalism are “a general chronic over-production, depressed prices, falling and even wholly disappearing profits; in short, the old boasted freedom of competition has reached the end of its tether and must itself announce its obvious, scandalous bankruptcy.”[9] Capitalist crises forced big industrialists to merge to form cartels in order to regulate the production, that is, competition itself created monopoly. Though it seemed as though the rise and spread of monopolistic associations would make it possible to keep crises relatively under control, the competition between monopolies, which has continued on a higher level and become more and more exacerbated, prepared the grounds for more devastating crises. But even the most severe crisis does not mean that the capitalist mode of production has reached an absolute deadlock and entirely lost the chance of reproducing itself. Capitalist crisis lays bare all structural weaknesses and contradictions of the mode of production. However, no crisis can lead to the automatic collapse of capitalism. Unless overthrown by revolutionary struggle of the working class, period of crisis paves the way for capitalist economy to reach relative equilibrium and so keeps the wheels of capitalism turning. Let us not forget: Marx points out that crises are momentary and forcible solutions of the existing contradictions. And adds: “They are violent eruptions which for a time restore the disturbed equilibrium.”[10]