Crises, Catastrophy and Mr. Strachey

DID Marx really believe that crises would be so catastrophic in their effects as to ensure the economic collapse of Capitalism? It is a convention of many of his critics and the so-called Marxist revisionists to say he did. None of them have ever given substance to their assertions with any worth while evidence.

It is true that the young Marx in Wage Labour and Capital (p. 45), spoke of " crises becoming more frequent and violent." And again in the Communist Manifesto (p. 18), we are told —" Crises by their periodical return put the existence of bourgeois society on its trial and each time more threateningly." But it is to Marx's detailed and mature economic investigation to which we must turn in order to estimate what he thought was the nature and role of Capitalist crises. And here we find no specific reference or concrete indication of a view that some mounting crescendo of crises will ultimately crash to economic ruin.

In point of fact, Marx never formulated a theory of crises, at least not in any systematic or cohesive form. Instead we get a treatment of the different aspects of crises, scattered through the 2nd and 3rd volumes of Capital and Theories of Surplus Value. So far from Marx laying down any hard and fast rules on the subject of crises, we get instead an analysis of a number of tendencies which are bound up with the production of crisis situations.

It seems fairly safe to assume then that Marx in his later and mature investigation of the actual trends in Capitalism, never regarded crises as the agent of the final destruction of extant society. On the contrary there is no little evidence to indicate that he saw crises as a normal but essential phase of the trade cycle which, he said, was peculiar to the Capitalist mode of production.

Indeed it was no other than Marx who pioneered the investigation into the nature of the antithetical yet mutually reciprocal trade cycle. It was Marx who showed one phase of the trade cycle is characterised by an acceleration of capital investment and as a corollary to this an increased tempo of industrial activity, rising employment, rising wages and increasing profits.

Because the different branches of industry are atomistically controlled or to state it alternatively because "anarchy of production," prevails in Capitalism, decisions for capital investment are carried out by Capitalists without knowledge or regard for investment decisions being made at the same time by other Capitalists elsewhere.

As a result of these autonomous and unrelated decisions to invest in a period of expansion, it is hardly surprising that overexpansion of a particular line of industry takes place or what comes to the same thing disproportionality of industrial development between the various branches of production. Thus one industrial sphere may have overexpanded relatively to other spheres and as a result it will be unable to sell its goods at a remunerative price. Consequently there will be in this particular sphere a contraction of investment and hence production. This action will have cumulative effects by leading to a reduction of demand of products and services of those industries which are linked with this particular industrial branch and which in turn will reduce their orders to other concerns likewise linked with them. If the initial overexpansion or disproportionality of industrial development is big enough a general fall in the demand for goods and services will spread from point to point and a general relative over-production will ensue.
Thus the phase of the business cycle associated with accelerating investment, rising wages, rising employment and increasing profits, will come to an end and be replaced by the antithetical phase of reduced investment, falling employment and declining wages and profits.

The orthodox economists also treat of what is termed in modern economic usage the business cycle theory. For them a period of brisk trade activity is linked with a high return on invested capital. While the antithetical phase i.e. a recession, is associated with a decline in the rate of profit below the normal range for investment purposes. Thus for them crises are analysed from the formal level of the supply and demand of investment funds. Marx, however, probed deeper and showed that the behaviour of the Capitalist class springs from the basic features of Capitalist society which constitute a particular set of antagonistic class relations of production and gives rise to an antagonistic form of income distribution. From the general standpoint of the Capitalist class a "recession" is the outcome of an unfavourable distribution of income in that the form of income going to the working class as wages, is too high and that part of income going to them as profits is too low, to make it worth their while to maintain a high level of investment.

If Capitalism could operate on some master plan then the correct proportional expansion between the different branches of industry might be attempted and investment decisions synchronised in respect of the entire economy. But Capitalism does not work like that. Each Capitalist or group of Capitalists produce for a market of whose size they have only an imperfect knowledge, let alone the entire network of markets operating in Capitalism. Hence whether too little or too much is produced cannot be known until after the event and it is only a major upset in the price mechanism which reveals that a number of unrelated and separate investment. decisions have brought about a rupture of equilibrium conditions.

Crises are not as some theorists of under-consumption imagine the outcome of expanded production, outstripping total consumption, demand, and so bringing about some permanent market decline.

It was never Marx's view that crises arise as the result of a chronic bias towards overproduction and an ever-increasing inability of the Capitalists to dispose of their products in a perpetually shrinking market. In Capital, Vol. 3 (p. 299), Marx, commenting on the upward swing of the trade cycle ends thus: " And in this way the cycle would run once more. One portion of capital which had been depreciated by the stagnation of its function would recover its old value. For the rest the same vicious cycle would be described once more in an expanded market and with increased productive forces."

From what has been said it is evident that Marx never viewed crises as an ineluctable agent for the ultimate destruction of existing society but as an antithetical but inseperable phase of the trade cycle.

In the light of the foregoing it would seem that periods of prosperity for the Capitalists i.e., periods of accelerating capital investment bring nemesis in the way of rising wages, rising costs, etc., which sooner or later tend to appreciably diminish profit margins. Crises would then seem the specific remedy for the evils arising from " prosperity." Stated from the more fundamental standpoint of Marx's analysis these evils are, "a production of too many means of production and necessities of life to serve as a means.of exploitation of the labourer at a certain rate of profit."

Nevertheless if crises can be looked upon from one point of view as a retribution for prosperity they can also be regarded as acting as a purgative to the body-economic, allowing it to be. restored to the healthier state of equilibrium. To put the matter specifically, crises contain the germ of a trade recovery. In the first place the existence of a large industrial reserve army will serve to cheapen the price of labour-power and so raise the rate of profit and because of the cheapness of labour-power, tend to retard the introduction of machinery and new methods and so make possible the more primitive technical concerns to become profitable once more. At the same time the sharp depreciation of capital values will lower the organic composition of capital, i.e. lower the ratio of constant capital (means of production) to variable capital (wage payments) and so assist in raising the rate of profit. Again during a crisis there are cheap and abundant resources available, including large reserves of labour-power. Thus the conditions are prepared in a shorter or longer period, for a resumption of increased investment and rising profit margins.
Crises are not then incidental interludes between periods of high trade activity but an essential corrective for the uninhibited self-expansion of capital. As Marx states it: " Periodically the conflict of antagonistic agencies seek vent in crises. The crises are always but momentary and forcible solutions of the existing contradictions, violent eruptions which restore the disturbed equilibrium for a while." (Capital, Vol. 3, p. 292).

To say then that Marx tied up his views on crises with an automatic breakdown theory is either to misunderstand or misrepresent him. While it is true that crises subject Capitalism to stresses and strains, to suggest that they will bring about the social and physical collapse of the system is something quite different. Marx so far as the present writer is aware never used the term " economic collapse of Capitalism."

For Marx, however, crises were a significant part of the dynamics of Capitalism and he regarded his own treatment of them as an important contribution to the understanding of the system. He saw them as not only an outcome of antagonistic agencies but as a means of resolving the conflict in a new equilibrium. The crisis plays then a definite role in influencing the long term trends of the system.

Capitalism may thus be described as a system of unstable equilibrium. Which brings us to Mr. Strachey. who states in Contemporary Capitalism (p. 218) that " Marx regarded the instabilities of Capitalism as a secondary matter and did not expect them to prove fatal to the system." But in that case the economic collapse theory which Mr. Strachey accuses Marx of holding, cannot be explained from Marx's theory of the production cycle of Capitalism. Marx, says Mr. Strachey, formulated something different. Marx's view of economic collapse is deduced from Marx's contention, according to Mr. Strachey, that Capitalism undergoes a continuous process of mass underconsumption and thus an ever-increasing inability of Capitalists to dispose of their products in an ever-decreasing market. Intense mass poverty would result, the workers would revolt and Capitalism would perish.

We are asked to believe, minus any evidence, that Marx gave up his formulation of the trade cycle concept and substituted a view of permanent stagnation, i.e. of falling wages, profits and investment, and ever increasing massive unemployment. Thus the system would run down like a clock. Crises would no longer play an active part; no new equilibrium could be established; capital accumulation would go on contracting and the basic feature of Capitalism, the self-expansion of capital would atrophy. Both employers and workers would become ever poorer, even if at different levels. Mr. Strachey consistent in his confusion, would have us believe nevertheless that Marx thought that in all this process the Capitalists would in some way grow ever richer.

Mr. Strachey, however, flatly contradicts himself in the same paragraph by stating that the instabilities of the system and Marx's alleged underconsumption views of crises are in some way clearly related. He adds lamely " but Marx never fully elucidated the connection between them." Marx did, of course, fully elucidate the connection between the instabilities of Capitalism and the emergence of crises. Mr. Strachey has never fully understood this connection, even though he wrote a book called The Nature of Capitalist Crisis. When Marx in the preface of Capital presupposed a reader willing to think for himself, he was perhaps a little optimistic. But a person who can state on one page that Marx regarded the instabilities of the system as secondary and then on the previous page aver that " Marx and Engels lived in the confident expectation that each crisis would be the system's last" i.e. fatal, is incorrigible.

Marx never constructed a catastrophic theory of crises. Nor did he say, as Mr. Strachey avers, that crises are due to the inability of the workers to buy back what they have produced. Although Mr. Stratchey was posing as a Marxist, he put this view forward in the name of Marx. Nevertheless Marx repudiated Rodbertus' view that crises were caused by a lack of paying consumption and could be remedied by highering wages. Marx also showed that it was " high wages " which constituted a factor for producing a crisis and a plentiful supply of cheap labour-power as a factor for initiating a boom.

Mr. Strachey, however, is not really an economist. He is a politician trying to explain the errors and illusions of the past but in fact only explaining them away. It becomes necessary therefore to set up a lot of false assumptions and with great gusto, knock 'em down. Like most politicians, he has a favourite aunt called Sally.

E.W , Socialist Standard March 1957

How Capitalism Works (part 4)

Anarchy of production

IN AN EXCHANGE economy control over the use of the means of production is scattered among thousands of profit-seeking enterprises with no central co-ordination of decisions about the amount and the kind of wealth to be produced. Anarchy inevitably prevails.

For a group of enterprises to make profits, its total productive capacity and output have to be restricted to the level at which the interaction of supply and demand will give a price high enough to cover both the cost of production and a margin for the average rate of profit. The chaotic way in which decisions about production are made means that it is sometimes difficult to restrict productive capacity and output to this level.

In agriculture in particular over-supplying the market is a chronic problem. This is due partly to lack of control over the process of production (essentialy the natural process of growth) and partly to the large number of small individual producers who still survive in this sector of the world exchange economy.

Once a market has been over-supplied, the immediate problem is how to offset the fall in prices which threatens the profits of the agricultural enterprises and the personal incomes of the individual producers. The immediate answer is to destroy the excess market supply, and every year fruit is dumped or milk is poured away or vegetables ploughed back into the ground or butter is fed to pigs. This is often mistakenly said to be the result of "overproduction". It is due rather to more having been produced than can be sold at profitable prices. "Overproduction" is quite the wrong word since frequently there are people who desperately need the goods (although unable to pay for them): "market oversupply" would be a more accurate description.

The long-term solution is just as restrictive. The State steps in and takes measures aimed at restricting not simply output but productive capacity as well. The most notorious of these policies is that adopted in America in the 1930s under which farmers are paid not to grow food. The Common Market now has a similar policy and has paid farmers to slaughter their cattle and pull up fruit-trees as well as to curtail farm production.

The States which govern the areas where food and agricultural raw materials are produced have also taken steps to combat the problem of chronic market oversupply. Typically they operate a quota system under which each State undertakes to restrict production within its frontiers to an agreed level and to destroy any amount produced in excess of this quota. This is why recent years have seen public bonfires of cocoa or coffee in poverty-stricken African states like the Ivory Coast, Ghana, and Kenya. When in 1968 the main wheat-producing States were faced with two bumper harvests on the run, they agree to restrict production. Canada's contribution was to pay its farmers to grow virtually no wheat at all during 1970.

Not that these restrictive practices were intended to secure monopoly profits. They aim merely to allow agricultural enterprises to make the average rate of profit (or the individual producers to get a very modest minimum income). Their significance lies in the fact that they dramatically show up the way in which the operation of the exchange economy restricts productive capacity even when human welfare demands it be increased.

Industry too destroys productive capacity in order to restrict output, as when a market is contracting. States then pay Industriai enterprises to destroy their machinery and equipment or themselves buy up (nationalise) their assets and arrange for the allegedly excess productive capacity to be destroyed. Generally speaking though industrial enterprises themselves manage on their own to restrict productive capacity and output to the profitable level. The problem of chronic oversuppiy of the market does not arise because the extra workplaces or the extra equipment that might produce the "surplus" are nor built in the first place.

This is the important point. The problem is not so much excess market supply as excess productive capacity. Excess market supply in agriculture and industries faced with a shrinking market is only a symptom of the fact that productive capacity there is able to supply the market with more than will result in profitabie prices.

THE BOOM-SLUMP CYCLE

The problem of matching production with market demand is not confined to particular markets: it arises also for the exchange economy as a whole. Here again in the long-run the competitive struggle for profits does result in the two being matched, but at the expense of short-term fluctuations. These have been features of the exchange economy since the end of the 18th century and have been called "the trade cycle", "the industrial cycle", "the business cycle" and "the boom slump cycle".

The regular occurrence of "slumps", during which production is well below the existing productive capacity — the notorious paradox of poverty in the midst of plenty — has led some economic thinkers to suggest that built-in to the exchange economy is a permanent lack of market demand or, as they often put it, "a chronic shortage of purchasing power. Slumps arise, in their view, because in the long run total market demand is not large enough to keep the existing productive capacity fully used. This amounts to saying, not simply that the need to sell products on the market at a profit restricts the productive capacity of society (a valid charge) but to saying that the system also has a permanent difficulty in selling at a profit even the wealth it does allow to be produced.

Whether or not the symptom allows the productive capacity it has created to be more or less fully used, it is guilty of not expanding its productive forces fast enough.

One lack-of-market-demand theory says that because prices are composed of wages plus profits and because market demand is composed only of wages then there must be a chronic lack of purchasing power. It is quite true that the wages paid to the workforce can never be enough to buy the whole net social product, but they do not have to because what wage-earners do not buy can be bought by enterprises out of their profits (whether it always will be is another matter).

The wealth which enterprises buy is generally quite different in character from the wealth wage-earners buy. Enterprises buy new raw materials, new buildings, and items to use the following year to produce more new wealth. Wage-earners buy food, clothing and shelter for immediate consumption. This distinction is between producer goods and consumer goods, "investment" being the act of buying producer goods and "consumption" the act of buying consumer goods.

Early critics of the capitalist economy failed to see the real nature of investment as the purchase of producer goods. They saw, correctly, investment as a deduction from consumption but made the mistake of assuming that the level of market demand was determined by the level of consumption. If you believe this, then it follows that the act of investment inevitably leads to a state of general market oversupply: the increased output brought about by investment faces a market reduced by the very act of investment! This theory of course makes the growth of the profit-motivated economy impossible unless markets outside the system can be found, and this indeed was how these theorists did explain growth.

Early defenders of the capitalist economy could see these critics were wrong, but they went to the opposite extreme and claimed that total market demand would always equal actual productive capacity. They conceded that productive capacity and demand in particular markets could get out of line but vehemently denied that this could happen to the economy as a whole. This denial was maintained in the face of the regular occurrence of periods when productive capacity was not fully used.

This view is known, somewhat inaccurately, as "Say's Law" (after the early 19th century French economist I.B.Say who was among the first to suggest something like it). It implies that the money obtained from selling one product is immediately spent on buying another one. But what if one seller decides not to spend the money he gets from a sale? Would this not interrupt the whole process?

Say's Law did not take into account the fact that money could be hoarded. But once "this possibility is accepted then so must the possibility of total market demand being, temporarily at least, below actual productive capacity: general market oversupply leading to idle productive capacity becomes a theoritical possibility. Hoarding must not be confused with saving. When a person hoards money he takes it right out of circulation and holds it idle. Saving is defined rather as lending the money, either directly or through the banking system, to someone else to spend. Since (if there is no hoarding) the money saved, or not spent on consumer goods, must be spent on producer goods, then savings and investment are equal. From this angle, the mistake the early lack-of-market-demand critics made was to assume that saving and investment had the same economic effect as hoarding.

But why should anyone want to hoard money and not use it either to buy consumer goods or to bring him an income as interest? Why indeed should any person? Wage-earners, however, are not the only buyers since enterprises also have money to spend. Most of the profits enterprises make are invested, spent on buying producer goods for future production. But, according to the law of profits, enterprises will only invest in future production if they think that they will make enough profits from selling the products. If they think that the chances of profit-making are too low then they apply the rule "no profit, no production". But, in this event, what happens to the profits they made the previous year? They are to all intents and purposes hoarded by being held idle as cash or maybe lent for short intervals at a low rate of interest.

This is how in the real world a state of general market over-supply and under-used productive capacity can come about. If, because of the slim profit prospects, enterprises hoard rather than invest their previous profits then total market demand will come to be insufficient to fully use the existing productive capacity.

Enterprises tend to judge the future rate of profit by the existing rate. Next month, in the context of explaining slumps, what might cause the rate of profit to fall will be examined.

ALB. Socialist Standard, April 1979

to be concluded...

Questions of the Day (part 16)

Inflation and unemployment

IN THE LAST QUARTER of the nineteenth century, during what was known at that time as The Great Depression, and again in the depression between the two world wars, an increasing number of workers — and even some professional economists — were paying attention to the analysis of capitalism made by Karl Marx in his work Capital. Marx showed that unemployment, and its rise to peak levels in periodical phases of trade depression, arise put of the structure of capitalism itself, and are therefore inevitable while capitalism lasts.

This growing interest in Marx was all but extinguished with the publication in 1936 of J. M. Keynes' The General Theory of Employment, Interest and Money. According to the new doctrine it only needs that the government "manage the economy in such a way as to maintain demand" for full employment to be created and trade depressions to be abolished.

Keynes described Marx's Capital as "an obsolete economic textbook, which I know to be not only scientifically erroneous but without interest or application for the modern world" ("A Short View of Russia", J. M. Keynes, 1925. p 14). Keynesian doctrines were accepted by most economists, political parties and the trade unions. Writing in 1957 (Remedies for Inflation) Mr. (now Sir Harold) Wilson stated that the Labour Party and all other "major parties" were Keynesian. As late as 1974, in spite of the evidence that Keynesian techniques had been a failure, the Tory M.P. Mr. Peter Walker called his party "the party of Keynes and Disraeli"; while the Liberal M.P. Mr. John Pardoe said that the Liberal Party is "the party of Keynes and William Beveridge".

Alone in this country the Socialist Party of Great Britain insisted from the outset that Marx was right; that the new doctrines were fallacies; that full employment cannot be maintained; that trade depressions cannot be eliminated, that the remedies proposed were only disguised inflation and would do nothing to serve working-class interests.

The Labour Party adopted the new policy at its Annual Conference in 1944, in a Report on Full Employment and Financial Policy, which declared:

"If bad trade and general unemployment threaten this means that total purchasing power is falling too low. Therefore we should at once increase expenditure .... We should give people more money and not less, to spend."

The Tory Party was committed to a similar view; but such was the confusion created by Keynes' theories that neither Party recognised that this is a policy of the crudest inflation. So at every general election in the post-war years they continued to declare their opposition to inflation. Both parties pledged themselves to maintain "full employment", defined in the Labour Party's 1945 General Election programme as "Jobs for All".

In the history of capitalism, as Marx had explained, periods of good trade and low unemployment alternate with periods of bad trade and high unemployment. One such period of low unemployment occurred in the years immediately following the second world war (helped by work on making good war damage); but Labour and Tory Governments both claimed this to be evidence of their success in "managing the economy". From 1955 onwards, however, unemployment has been on a sharp upward trend, each peak of unemployment rising to a higher level — to 747,000 in 1963, to above a million under the Heath Government in 1972, and to 1,500,000 in 1976 under Labour Government, and to over 1,600,000 in July 1977, This was capitalism operating in its normal way; but it led many who had wrongly believed that Keynesian techniques would abolish unemployment to reach the false opposite conclusion: that it was those techniques that had been the cause of unemployment. The Times,13 February 1976, told its readers that "unemployment ... will decline as fast and as soon as we all forget Keynes".

But if Keynesian policies did nothing for unemployment, their effect on prices was that by 1977 the general level was ten times what it had been in 1938, and was rising fast.

Inflation is caused by governments going on year after year printing and putting into circulation hundreds of millions of pounds of additional paper money.

Wherever and whenever currency has been issued in excess, the price level has risen; and wherever and whenever currency has been restricted, prices have stabilised or fallen. In the period 1920-23, the printing presses of the German central bank were busy day and night pouring out notes, and prices were rocketing upwards. In Britain in the same three year period the Government had decided to halt inflation; the note issue was restricted and prices were falling fast.

Inflation is not the only factor affecting prices. In Britain, in the 90 years before 1914 when there was no inflation (the price level in 1914 being below that of 1820), prices rose moderately in trade booms and fell again in periods of bad trade, a process also explained by Marx.

The reason there was no inflation in Britain in the century before 1914, was that through the operation of the gold standard the note issue was controlled. Beyond a fixed low limit the Bank of England could not issue additional notes without adding an equivalent amount of gold to the reserve in its vaults. Also the notes, by law, were freely convertible into a fixed amount of gold — one pound or a sovereign being fixed at about a quarter of an ounce of gold. Gold coins and Bank of England notes both circulated; but because of legally enforced convertibility a Bank of England note "was as good as gold", and the combined circulation of notes and gold coins was equivalent to the circulation of a total amount of gold.

Marx showed that if that total amount of gold is replaced by inconvertible paper money, and if the amount of that paper money is then issued in excess, prices are pushed up accordingly.

"If the quantity of paper money issued is, for instance, double what it ought to be, then in actual fact one pound has become the money name of about one-eighth of an ounce of gold instead of about one quarter of an ounce .... The values previously expressed by the price £1 94 will now be expressed by the price £2" (Capital, VoL 1.
Allen & Unwin Edition, p. 108).

Governments since 1938 have followed the policy of continually increasing the amount of currency in circulation, from under £500 million in 1938 to over £7,000 million in 1977, an increase far beyond any increase that would have been necessary because of the expansion of total production and trade. In 1976 and 1977 when the Government claimed that its "wages and incomes policy" would curb inflation the flood of additional paper money went on without interruption.

The man, more than any other, who was responsible for abandoning the nineteenth-century policy of controlling the amount of paper money was J. M. Keynes, who declared that it was no longer necessary "to watch and to control the creation of currency".

So for 40 years the major British political parties and the trade unions have been misled by the Keynesian policy of inflation into believing that capitalism could be rid of unemployment and trade depressions. It failed as it was bound to do with the market conditions and 'free' labour conditions of the western world.

Marx showed, and subsequent events have confirmed his analysis of capitalism's economic laws, that, arising from capitalism's inescapable anarchy of production, its progression is the cycle of moderate expansion of production and sales, then boom, then crisis, then depression. But just as there is no Keynesian device which will secure conditions of permanent boom, so there is no such thing as a permanent depression or "collapse of capitalism". (In the middle of "The Great Depression" Frederick Engels, three years after the death of Marx, did temporarily hold that Marx's cycle had ceased to operate and put forward a theory of "Permanent Depression"; but events soon showed this to be wrong and he returned to Marx's view — Preface to Capital 1886.)

In a depression, with bankruptcies which remove competitors, stocks of unsold goods disposed of, wages restrained by unemployment, and raw material prices and interest rates forced down, sooner or later conditions return restoring prospects of making a profit and capitalism expands again: but only to repeat the cycle. There is, however, one kind of 'collapse' that can occur, a collapse of the currency if the excess issue is expanded to the point where the currency as Marx put it "falls into general disrepute", and nobody wants to hold or receive paper money.

Although he only half understood the problem, such a situation was foretold by Herman Cahn in his Collapse of Capitalism published in 1919. What he foretold as inevitable, like an "Act of Nature", was that "within a few years" (or within a year if the war continued), there would be collapse and "social chaos"; out of which, though the workers were not prepared for it, Socialism would arise.

A currency collapse was at that time on the way in the great German inflation (by contrast the British Government had decided in that year to halt it). By December 1923 inflation in Germany had reached fantastic proportions and unemployment had risen to 30 per cent of workers registered as unemployed, an unknown number not registered, and 42 per cent on short time. There was indeed "social chaos" while a new currency was issued and conditions got back to normal. But chaos does not produce Socialism. In Germany it helped to prepare the way for the rise to power of the Nazi Party under Hitler.

The situation in Britain in 1977 is that, although Keynesian inflation has lost many of its adherents, the Keynesians have not given up the struggle. Under the name of 'reflation' it is still being pushed by the T.U.C., by some professional economists, by Labour Party leaders and by some of the Tories and Liberals. (Most of the 'Left-wing' organisations are all for it.) If the inflationists have their way they could produce a currency collapse here. The dilemma of all parties is that if they abandon the Keynesian belief that unemployment and depression can be eliminated under capitalism, what can they do except face the alternative — fearful for them — of getting rid of capitalism?

Some politicians and economists are now urging a return to the nineteenth century gold standard in order to get rid of inflation.

It only needs to add that getting rid of inflation is not the answer. Capitalism without inflation, as in the nineteenth century, no more solves working class problems than does capitalism with inflation, as in the years since the end of the second world war.

Further Reading

Marx versus Keynes SPGB education document
The Marxian Theory of Inflation SPGB education document
the Edgar Hardcastle Internet Archive