The Cyclical Nature of Economic Crisis in Capitalism

The market is in chaos. The surplus of goods is not in comparison with the needs of society, but in comparison with the limited purchasing power of the working masses. While the surplus crisis is breaking out, goods are being destroyed, and millions of workers are falling into poverty because they are unable to pay.

The cause of the capitalist economic crisis stems from the fundamental contradiction of capitalism. It is the contradiction between the nature and high level of socialization of the productive forces and the capitalist private ownership of the main means of production of society. This contradiction manifests itself in the following contradictions:

- The contradiction between the very strict and scientific organization and planning in each enterprise and the spontaneous anarchist tendency in the whole society.

- The contradiction between the tendency of capital to accumulate and expand without limits and the increasingly limited purchasing power of the masses due to impoverishment.

- Antagonistic contradiction between the bourgeoisie and the working class.

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The first economic crisis broke out in 1825 in England and the first crisis of a capitalist nature broke out in 1847.

2. The cyclical nature of economic crises in capitalism

The emergence of economic crises makes the capitalist production process cyclical. In the period of free competition of capitalism, every 8 to 12 years the capitalist economy has to go through an economic crisis. The economic cycle of capitalism is the period of time the capitalist economy moves from the beginning of one crisis to the beginning of the next crisis. The economic cycle consists of four stages: crisis, depression, recovery and prosperity.

- Crisis is the starting stage of a new economic cycle. In this stage, there is a surplus of goods, stagnation, prices drop sharply, production stagnates, factories close, workers become unemployed en masse, wages fall. Capital loses the ability to pay debts, goes bankrupt, and the productive forces are seriously damaged. This is the stage where contradictions manifest in the form of fierce conflicts.

- Desolate: the characteristic of this stage is that production is in a state of stagnation, no longer continuing to decline but also not increasing, trade is still stagnant, goods are sold at discounted prices, and capital is idle because there is no place to invest. In this stage, to escape the deadlock, the surviving capitalists seek to reduce costs by lowering wages, increasing the intensity and time of workers' labor, and innovating fixed capital to make production still profitable in a state of price reduction. The innovation of fixed capital increases the demand for means of production and means of consumption, creating conditions for the general recovery of the economy.

- Recovery: is the stage in which factories are restored and production expanded. Workers are re-attracted to work; production reaches its old level, prices increase.

increase, the profit of capital also increases.

- Prosperity: is the stage of production development beyond the peak point reached in the previous cycle. Demand and consumption capacity of goods increase, factories are expanded and built. Demand for credit increases, banks lend money, production capacity exceeds the purchasing power of society. Therefore, it creates conditions for a new economic crisis.

Economic crises occur not only in industry but also in agriculture. But crises in agriculture often last longer than crises in industry. This is because the private monopoly of land ownership has hindered the renewal of fixed capital to escape the crisis. On the other hand, in agriculture there is still a large number of small farmers whose only condition for living is to produce agricultural commodities on their own land, so they have to maintain production even during the crisis.

In today's capitalism, economic crises are still inevitable, but there is active intervention by the bourgeois state in the economic process. Although this intervention does not eliminate crises and cycles in the economy, it has limited the destructive effects of crises.

3. Consequences of economic crisis

The economic crisis broke out, causing the production capacity of the capitalist economy to be severely damaged; a series of enterprises were closed, production scale was reduced, prices fell, trade was reduced, many banks were inactive, the stock market was in turmoil, and stock prices fell. A series of small and medium enterprises went bankrupt. The economic crisis of 1929-1933 reduced 1/3 of industrial output and 2/3 of international trade in more than 50 countries. The United States destroyed 92 iron furnaces, destroyed 10.4 million acres of cotton, and destroyed 6.46 million pigs. Brazil destroyed 22 million bags of coffee. Denmark destroyed 117,000 cattle.

While such a huge amount of wealth was destroyed, millions of workers fell into poverty and hunger. Millions of hired workers lost their jobs. Taking advantage of the increasing unemployment, capitalists increased the exploitation of workers by lowering wages, increasing the intensity and length of work. Not only were workers in the mother country exploited, but people in colonies and dependent countries also suffered the same fate. Therefore, the economic crisis further deepened the antagonistic contradictions between the bourgeoisie and the proletariat; between capitalists and colonial peoples.

Review questions

1. What is gross social product, social capital and implementation of gross social product?

festival?

2. Present the conditions for implementing simple reproduction and expanded reproduction of ideas.

social version

3. Analyze the process of national income distribution under capitalism, thereby drawing out the significance of studying this issue.

4. Analyze the causes, periodicity and consequences of economic crisis.

5. How did C. Marx apply the method of abstraction to present the law of implementation of social capital reproduction?

6. What is the significance of the conclusions drawn from the study of the conditions for the implementation of social capital reproduction in economic management?

Chapter VII

Forms of capital and forms of expression of surplus value

Surplus value is a category that expresses the nature of capitalist production. In the real life of capitalist society, surplus value is transformed and expressed in industrial profit, commercial profit, bank profit, loan interest, capitalist land rent. In this chapter, we study these specific forms of expression of surplus value, and at the same time affirm the laws of their movement under the conditions of free competition of capitalist production.

I- Profit, average profit and production price

1. Capitalist costs of production, profits and profit rates

a) Capitalist production costs

As we know, to create the value of goods, it is necessary to spend a certain amount of labor, called labor cost, including past labor and present labor. Past labor (materialized labor), that is, the value of means of production (c); present labor (living labor) that is, labor that creates new value (v + m).

From a social point of view, the cost of labor is the real cost of society, the cost of creating commodity value. The symbol of commodity value is: W = c + v + m.

However, for capitalists, they do not have to spend labor to produce goods, so they do not care about that. In fact, they only care about using capital to buy means of production (c) and buy labor power (v). Therefore, capitalists only consider how much capital is wasted, not how much social labor is wasted. C. Marx called that cost the capitalist cost of production, denoted by k (k = c + v).

So the cost of capitalist production is the cost of capital that the capitalist spends to produce.

production of goods

When capitalist production costs appear, the formula for the value of commodities (W

= c + v + m) will turn into W = k + m.

Thus, there is a difference between the value of goods and the cost of capitalist production in both quantity and quality.

In terms of quantity: capitalist production costs are always less than actual costs or commodity values:

(c + v) < (c + v + m)

Because productive capital is divided into fixed capital and circulating capital, so the cost

Capitalist cost of production is always less than advanced capital.

For example: A capitalist invests in fixed capital (c 1 ) of 1,200 currency units; circulating capital (c 2 and v) is 480 currency units (in which the value of raw materials (c 2 ) is 300 and wages (v) is 180). If fixed capital is depreciated in 10 years, that is, 120 currency units are depreciated each year, then:

Production cost is: 120 + 480 = 600 currency units. Advance capital is: 1200 + 480 currency units.

But when researching, C. Marx often assumed that fixed capital was completely depreciated within a year, so the total advanced capital and capital costs were always equal and both denoted by k (k = c + v).

In terms of quality : actual costs are labor costs, which correctly and fully reflect the social labor costs necessary to produce and create commodity value, while capitalist production costs (k) only reflect the capitalist's capital costs, it does not create commodity value.

C. Marx wrote: the category of production costs has nothing to do with the formation of commodity value, nor does it have anything to do with the process of increasing the value of capital.

The formation of the capitalist cost of production (k) conceals the exploitative nature of capitalism. Commodity value: W = k + m, where k = c + v. Looking at the above formula, the distinction between c and v has disappeared, it seems that k generates m. It is here that the cost of labor is obscured by the cost of capital (k), labor as the entity, the source of value, disappears, and now it seems that the entire cost of capitalist production generates surplus value.

b) Profit

There is always a gap between the value of goods and the cost of capitalist production, so after selling the goods (price = value), the capitalist not only fully recovers the capital advanced, but also earns an amount of profit equal to

m. This amount is called profit, denoted by p.

Surplus value, compared with the entire advanced capital, is conceived as the offspring of the entire advanced capital, and will take the form of transformation as profit. Or profit is the amount of profit that the capitalist receives due to the difference between the value of goods and the cost of capitalist production.

If the symbol for profit is p then the formula is:

W = c + v + m = k + m will now translate to:

W = k + p

(or the value of goods equals the cost of capitalist production plus profit).

The question is, what is the difference between p and m?

In terms of quantity : if goods are sold at their true value, then m = p; m and p are similar in that they both have the same origin, which is the result of unpaid labor of hired workers.

In essence, profit and surplus value are essentially the same, profit is merely a mystical form of surplus value. C. Marx wrote: "Surplus value, or profit, is precisely that excess of the value of a commodity over its cost of production, that is, the excess of the total amount of labor contained in a commodity over the amount of paid labor contained in a commodity" 1 .

The category of profit misrepresents the nature of the production relationship between capitalists and wage laborers, because it makes people think that surplus value is not created only by wage laborers. The reasons for this phenomenon are:

Firstly, the formation of capitalist production costs has blurred the difference between c and v, so that the p generated in the production process by part v being replaced by labor power now becomes the offspring of the entire advanced capital.

Second, because the cost of capitalist production is always less than the actual cost of production, the capitalist only needs to sell goods at a price higher than the cost of capitalist production and possibly lower than the value of the goods to make a profit. For capitalists, they believe that profit comes from buying and selling, from circulation, and from the capitalist's business talent. This is shown in the following way: if the capitalist sells goods at a price equal to their value, then m = p; if they sell at a price higher than their value, then m < p; if they sell at a price lower than their value, then m > p. But in the whole society, the total price is always equal to the total value, so the total profit is always equal to the total surplus value. It is the quantitative disagreement between m and p that further conceals the exploitative nature of capitalism.

c) Profit margin

In fact, capitalists are not only interested in profits, but also in

to the profit margin.

The rate of profit is the ratio, expressed as a percentage, between surplus value and all advanced capital.

If the profit rate is denoted by p' we have:

p' 

mc v

x 100 % p

x 100%

Profit is the transformed form of surplus value, so the profit rate

1. C.Marx and F.Engels: Complete Works , National Political Publishing House, Hanoi, 1999, vol.25, part I, p.74.

is also the transformation of the surplus value rate, so they have a close relationship with each other. But between m' and p' there are differences in both quantity and quality.

Quantitatively: p' is always smaller than m', because:

p' 

mc v

x 100 % , still

m' m

x 100 %

In terms of quality: m' reflects the level of exploitation of workers by capitalists. P' cannot reflect that, but only indicates the level of profit from capital investment.

The rate of profit only tells capitalists where to invest their capital more profitably. Therefore, making profits and pursuing the rate of profit are the driving forces of capitalists and the goals of capitalist competition.

d) Factors affecting profit margin

The capitalists' thirst for profit is limitless. No matter how high the rate of profit is, it cannot satisfy their bottomless greed. However, whether the rate of profit is high or low does not depend on the subjective will of the capitalists, but on the following objective factors:

- Surplus value rate:

The higher the surplus value rate, the greater the profit rate and vice versa.

For example:

+ If the value structure of goods is: 800 c + 200 v + 200 m, then m' = 100% and p'=

20%.

40%.

+ If the commodity value structure is: 800 c + 200 v + 400 m, then m' = 200% and p' = Therefore, all tricks to improve the level of exploitation of surplus value,

are also tricks to increase profit margins.

- Organic structure of capital:

Under the condition that the rate of surplus value remains constant, the higher the organic composition of capital, the lower the rate of profit and vice versa.

For example:

+ If the organic composition of capital is 7/3 then: W = 70c + 30v + 30m and p' = 30%

+ If the organic composition of capital is 8/2 then: W = 80c +20v + 20m and p' = 20%.

Normally, as the organic composition of capital increases, the rate of surplus value also increases.

may increase, but not enough to offset the decline in profit margins.

- Capital turnover rate:

+ If the turnover rate of capital is greater, the annual surplus value rate increases, and therefore the profit rate also increases.

For example:

+ If the turnover rate of capital is 80c + 20v + 20m per year, then p' = 20%.

- If the turnover rate of capital is 2 times a year: 80c + 20v + (20 + 20)m, then p' = 40%.

So the rate of profit is proportional to the number of turnovers of capital and inversely proportional to the turnover time of capital.

- Saving constant capital

Under the condition that the rate of surplus value and variable capital remain constant, the smaller the constant capital, the larger the rate of profit.

Because according to the formula:

p' 

mc v

x 100 %

Obviously when m and v are constant, the smaller c is, the larger p' is.

Therefore, in reality, to increase the rate of profit, capitalists have sought every way to save constant capital such as using machinery, equipment, factories, warehouses, and means of transport with the highest efficiency; extending the working day, increasing labor intensity; replacing expensive materials with cheap materials, reducing labor insurance expenses, protecting the environment, reducing energy consumption, and utilizing scrap, waste, and waste to produce goods.

The four factors above are all used and exploited thoroughly by capitalists to obtain the highest profit rate. However, with different characteristics and conditions, the same amount of capital invested in different production sectors will result in different profit rates. Therefore, capitalists compete fiercely with each other, leading to the formation of average profits.

2. Competition within the industry and the formation of market value

Competition appears and is closely associated with the development of the commodity economy. Competition is the rivalry, the fierce struggle between producers and traders of goods to win favorable conditions for production and consumption of goods, to gain the highest profits. In the commodity economy, competition is both the environment and the driving force.

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