1. The causes of crises are rooted deeply in the very nature of capitalism, in its basic contradiction - between the strengthening social character of production and the private-property form of appropriation that, in pursue for profit, - leading to anarchy in production. It means, that the substantial cause of the crisis is hidden in the contradiction between the labour and the capital. When we tell about the contradiction between the labour and the capital, we first of all imply the contradiction between the end of capitalist production, i.e. the production of surplace value and the application of the socialised labour of immediate workmen, the employed workers, for production and reproduction. The purpose of the capitalist production is the extraction of the surplace value. The capitalist production is dominated by anarchy and antagonisms, that bring us to an unlimited expansion of the capitalist production. The very capitalist relations and the purpose of the capitalist production become an obstacle to the umlimited expansion of production.
2. With the anarchy of the production under capitalism from time to time a part of the accumulated capital (in goods, im means of production and in money) cannot be used as a means of exploitation, giving additional profit. Then there happens a termination and then a dicrease of the production, i.e. there develops a crisis of reproduction.
3. This above-mentioned main contradiction makes every capitalist increase his offer on the market, while reducing the demand for the means of production and the demand amongst his workers for the consumer goods through decreased wages. In any form of capitalism, with certain time intervals this leads to the crises of overproduction. It is impossible to avoid crises under capitalism. Their presence is due to the processes described below.
4. Capitalism, as we know, is a universal commodity-based economic system, or, in other words, it is a commodity-based economic system developed to the extent where the labour power is a commodity. Labour power is a conglomeration of physical and spiritual reserves that are used while producing material and other values. This is a special kind of commodity, which can be used to create a greater value than its own.
Due to the chaotic arrangement of commodity-based capitalist economy, even if the wage-labourers were paid the full cost of their labour power (which rarely happens), sooner or later the volume of commodities produced would exceed the demand, the major part of which is comprised of the demand of the majority of the population, i. e. the labourers, the other part is the demand of the capitalist entrepreneurs on the means of production. This is where the crisis comes in. Thus capitalism, being a commodity-based economic system from its very start, is bound to engender crises.
5. This fact was specifically remarked in the very early editions of the Programme of the Russian Social-Democratic Labour Party (Bolshevik) and Russian Communist Party (Bolshevik). [1]
“The main characteristic of such a society is production for the market on the basis of capitalist production relations, whereby the largest and most important part of the means of production and exchange of commodities belongs to a numerically small class of people, while the overwhelming majority of the population consists of proletarians and semi-proletarians who, by their economic conditions, are forced either continuously or periodically to sell their labour power; that is, to hire themselves out to the capitalists, and by their toil to create the incomes of the upper classes of society…
Moreover, the same technical progress enables the entrepreneurs to utilise to an ever greater extent woman and child labour in the process of production and exchange of commodities. And since, on the other hand, technical improvements lead to a decrease in the entrepreneur’s demand for human labour power, the demand for labour power necessarily lags behind the supply, and there is in consequence greater dependence of hired labour upon capital, and increased exploitation of the former by the latter.
Such a state of affairs in the bourgeois countries, as well as the ever growing competition among those countries on the world market, render the sale of goods which are produced in greater and greater quantities ever more difficult. Overproduction, which manifests itself in more or less acute industrial crises — which in turn are followed by more or less protracted periods of industrial stagnation — is the inevitable consequence of the development of the productive forces in bourgeois society. Crises and periods of industrial stagnation, in their turn, tend to impoverish still further the small producers, to increase still further the dependence of hired labour upon capital and to accelerate still further the relative, and sometimes the absolute, deterioration of the condition of the working class.
Thus, technical progress, signifying increased productivity of labour and the growth of social wealth, becomes in bourgeois society the cause of increased social inequalities, of wider gulfs between the wealthy and the poor, of greater insecurity of existence, of unemployment, and of numerous privations for ever larger and larger masses of toilers.”
6. We should remark specifically that, as a commodity, the labour power is virtually never, nowhere, not even in the most developed country, paid at its full cost, i. e. fully as a wage. The cost of the labour power is determined as a cost of means required to normally (correspondingly with the level of development and technical progress, culture and the level of the working class’ struggle) reproduce and develop the physical and spiritual capabilities of worker and his family. We should remark that this was intuitively understood by the most progressive representatives of the bourgeois class. For instance, the prominent organiser of production, the father of the assembly lines, said: [2]
“You pay the man for his work, but how much does that owe to his home? How much to his position as citizen? How much to his position as father? The man does the work in the shop, but his wife does the work in the home. The shop must pay them both. On what system of figuring is the home going to find its place in the cost sheets of the day’s work? … That is, after having supported himself and family, clothed them, housed them, educated them, given them the privileges incident to their standard of living, ought there to be provision made for still something more in the way of savings profit? And are all properly chargeable to the day’s work? I think they are.”
Ford, obviously, did not care much about social justice; rather, he showed understanding of how essential high consumer demand is for the production, and he also understood the possibility of social strikes was a great danger for capitalism. Nonetheless his position has been quite progressive not just by the standards of the first half of the 20th Century, but, in many ways, for our epoch.
What was understood by the high-flyers is seen in a totally different manner by the typical representatives of the bourgeois class. This is well seen with the example of today’s Russia: the mean wage in 2008 (pre-crisis levels) had been around 16000 roubles per month, while the cost of the labour power converted into currency is estimated to be between 160000 and 240000 roubles (depending on the region, type of labour and the number of children). In other words, the wage today is 7 to 10 percent of the labour power costs.
7. As it’s well known, the worker creates the cost of the labour power in a certain time period, while the rest of the day, the surplus time, the worker spends working for capitalist, creating the surplus value, which will then become a part of the commodity mass, which under chaotic arrangement of capitalist economy can remain without demand, and from time to time it does remain undemanded. An excellent example of computing the rate of workers being exploited based on the statistical data of 1908 is given by V. I. Lenin in his brief outline entitled “Workers’ Earnings and Capitalist Profits in Russia”:
“Let us now compare the workers’ earnings and the capitalists’ profits. Each worker receives, on the average, 246 rubles a year, but he brings the capitalist an average profit of 252 rubles a year.
It follows that the worker works the lesser part of the day for himself, and the greater part of it for the capitalist. If, for example, we take the working day to average 11 hours, we shall see that the worker is paid only for five and a half hours and even somewhat less than that. The other five and a half hours he works gratuitously, without receiving any pay, and the entire sum earned by him during this half day constitutes the capitalist’s profit.“ [3]
Marx’s theory of realisation and the inevitable crisis of overproduction is outlined in more detail in V. I. Lenin’s work “Development of capitalism in Russia”. [4] Lenin notes that Marx’s thesis that “the ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their outer limit” is unconditionally true, but that is not all. For the inner market the role of the means of production is uncomparably higher than the role of the consumption goods. The analysis of the laws of permanent capital circulation also shows the inevitability of capitalist crises.
8. Thus we emphasise again that in the process of spontaneous capitalist reproduction at certain regular intervals there come moments, when the demand for the goods and means of production is somewhat behind the available mass of commodities and services. Then comes the crisis. The other question is: what is the timeframe between the crises determined by, and is it possible to regulate them?