Theories of Economic Crisis in the Capitalist System (Part-5)
For scientific bourgeois political economy, the main thing was not to criticise capitalism, but to proclaim its superiority and eternity. Classical bourgeois political economy defended the interests of the industrial bourgeoisie.
Criticism of Some Crisis Theories
For scientific bourgeois political economy, the main thing was not to criticise capitalism, but to proclaim its superiority and eternity. Classical bourgeois political economy defended the interests of the industrial bourgeoisie. But the theoreticians of the classical bourgeois political economy were not bought pencil-pushers, but elements who investigated without self-interest, without abandoning the ground of objectivity, elements who were progressive for their time.
Historically, this economy, even under its last representative Ricardo, did not have the opportunity to analyse the transition of capitalism to the stage of industrial (mechanised) production and the outbreak of crises of overproduction. Crisis under capitalism has never been an important issue for bourgeois political economy. When capitalism passed into the stage of industrial capitalism, bourgeois political economy came to an end and the conditions for its existence as a science disappeared. Industrial capitalism also meant crises of overproduction and the emergence of the class struggle, the irreconcilable contradictions between the bourgeoisie as a class and the proletariat in all its intensity. This was and is the ‘death knell’ (Marx) for classical bourgeois economics. Classical bourgeois political economy as a science disappeared without finding a solution to the problem of crisis in the capitalist economy. Marxism explained the causes of the crises of overproduction in capitalism and at the same time criticised anti-Marxist crisis theories by grouping them under certain conceptions. We say ‘certain conceptions’ because almost every researcher in vulgar economics had developed a unique theory of crisis. But the common point in all of these theories was not to try to explain crises by starting from the fundamental contradiction of capitalism. Besides this common point, there are two main currents/directions that we see in these crisis theories. Attempts to explain the economic crisis by analysing the phenomena of disproportionality and underconsumption.
Disproportionality theories:
Tugan-Baranovski:
‘If the expansion of production is virtually unlimited, we must also recognise the expansion of the market as unlimited. For there is no other obstacle to the expansion of the market than the productive forces at the disposal of society in the proportional division of social production’ (T. Baranovski).
Hilferding:
‘The term ‘commodity overproduction’, like the term ‘underconsumption’, means nothing at all. In a very narrow sense one can only speak of underconsumption in a psychological sense. It can only mean (this): Society consumes less than it produces. But it is not clear why this would be possible if it were produced in the right proportion... Production can be infinitely expanded without ever reaching the overproduction of commodities’ (R. Hilferding).
According to Tugan-Baranovski and Hilferding: The crisis of overproduction under capitalism is caused by the disproportion between the different branches of production during the period of economic growth. As long as the proportionality between the different branches of production is maintained, the poverty of the masses cannot limit the scope of capitalist production and capitalist production therefore develops unlimitedly without crisis.
The theory of underconsumption:
The main proponent of the theory of underconsumption was Sismondi. The same theory was later defended, with some modifications, by J. Karl Rodbertus (1805-1875). Like the disproportion theory, this theory does not explain the cause of the economic crisis on the basis of the internal mechanism of capitalism and its fundamental contradictions. According to this theory, consumption lags behind production. That is, not all of the product is consumed. Hence the crisis breaks out. The insufficient consumption of the masses cannot be the cause of economic crises. In explaining the crisis of underproduction or the lag of consumption behind production, the fundamental contradiction of the capitalist mode of production is not taken as the starting point. The advocates of this theory of crisis look for the causes of economic crises not in the production process, but in the market, in the exchange process.
To explain economic crises according to this theory also means the following: The capitalist system is a good system. The important thing is to prevent the outbreak of a crisis, and this can be prevented. Because the problem, the cause of the crisis, lies not in the fundamental contradiction of the capitalist system, but in the blockage of its functioning in the sphere of the market and exchange. Once this blockage is removed, the system itself will be free from crises. It is not for nothing that the social democrats are trying to save capitalism by clinging to this theory of crisis!
Monetary Crisis Theories and Developing Countries
In today's world, although the causes of crises are very different, the speed of their spread is very high. The effects of these crises, which are generally caused by financial (foreign exchange, foreign debt and banking) reasons, show themselves for a long time. I think it would be useful to share some important details in order to better understand the system that non-Marxist crisis theories feed on and to analyse it in macroeconomic terms. It is generally observed that short-term hot money leaves the country after monetary crises. When we analyse the crises since the 90s;
A- Primary Generation Currency Crisis Theory
It is the theoretical perspective put forward by Krugman and developed by Flood and Garber in order to explain the economic crises that emerged as external debt crises in Latin America since the 1970s. The theory argues that the implementation of the fixed exchange rate system in the process of closing the public deficit through the increase in the money stock leads to an exchange rate crisis.
B- Second Generation Currency Crisis Theory
This theory put forward by Obstfeld is a model describing the European Monetary Crisis that emerged in 1992. Since the theory focuses on the currency crises of developed countries, it sees the international liquidity problem as the cause of the currency crisis.
C- Third Generation Currency Crisis Theory: Krugman's Moral Risk Model
Kruagman argued that the crisis in East Asia in 1997 could not be explained by the first and second generation crisis models. According to Kruagman, the cause of monetary crises is the moral hazard created by governments' guaranteeing the repayment of foreign debt.
D- Sachs' Banking Crisis Model
Banking crisis is generally a consequence of the tendency of monetary institutions to extend short-term borrowed funds as long-term loans. When monetary institutions channel a significant portion of the funds they collect into highly illiquid or illiquid long-term investments, the reserve requirements that they are obliged to keep under the law may be insufficient.
E- Monetary Liberalisation and the Boom-Bust Cycle Model
Allen F. Gale D. (1999) attribute the main cause of crises to the malfunctioning of the market system. The market-based financial system leads to periodic monetary crises. According to Allen and Gale, the process of monetary crisis consists of three stages. The first stage starts with monetary liberalisation that leads to credit expansion. The most important indicator of liberalisation is the removal or minimisation of government control over wages, interest rates and credit contracts. The expansion of credit supply leads to an increase in the prices of real assets such as securities and real estate, causing the emergence of a price bubble. This price increase may last for a certain period of time, even for years, by causing the price bubble to inflate. The second stage of the monetary crisis begins when the price bubble in real assets bursts (bust) and the existing high price level collapses. In the third stage of the monetary crisis, a large number of firms and other investors who borrowed money to buy assets at inflated prices become unable to repay their debts (default).
F- Contagion Effect of Monetary Crisis
It is the effect of the crisis that emerges in one country spreading to other countries. This effect is realised in two ways. The first is the contagion effect arising from international economic linkages. This is called the fundamental based contagion effect based on economic indicators. The second one is the contagion effect arising from the psychology in the market or the interpretation of current economic developments from another perspective, independent of economic indicators. These effects spread for various reasons;
1- Effects arising from foreign trade.
2- Macroeconomic Similarity,
3- Effects due to Herd Behaviour
4- Effects arising from the Globalisation of Monetary Markets
5- Spillovers from the Illiquidity of International Investors.
Conclusion
Bourgeois modern theories of crisis are at least as old as the bourgeoisie. The economic crisis theories of today's capitalists are no different from the theories mentioned above. Look at the explanations of speculation, stock market crises, banking and credit crises and economic crises. You will find understandings similar to the above. The wrong policies of governments, states, this or that international financial institution, banks, owners of capital, greed for profit, etc. are shown as the causes of the crisis. In other words, the bourgeoisie has not added new ones to the various crisis explanations, it has adapted them to the conditions. Moreover, in all these crises, national economies shrink significantly, production and employment decrease, national income falls and unemployment rates rise. However, there are also some new understandings. These understandings are not directly related to the economic crisis, but to the future of capitalism. In order to get rid of these crises, measures for the continuation of the system such as structural measures, bank mergers, a healthy and highly supervised banking sector, accounting standards and transparency criteria are considered. The aim is the continuity of the functioning of the capitalist system on condition that it will never decline again. Capitalism, on the other hand, is a system that increases the income differences in the world, creates an order desired by multinational companies, deepens poverty and serves the ambitions of imperialism, and it is never without an alternative.
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