Cause of recessions ?

[Leon5]

I've read a lot about crisis theory, I know about the TotRoPtF , underconsumtion , overaccumalation etc. The question I have is do all these factor in recessions? Is it just one factor ? Or does it really just depend on the crisis itself.

[Prometeo liberado]

Recession IMO is a natural cycle inherint in the contradictions of a capitalist system. All the above reasons you have stated may be just different avenues in which it reveals itself. Along with capitalist prosperity comes the ever increased need to further profits and with this comes deregulation, freezing and roll back of real wages and capital flight disguised as investment. The standard for profits remain the same, cost of living rises, benefits and safety nets are lowered to make up the difference. Cash strapped cities sell bonds to generate funds. These bonds over a long period of recession will be difficult to pay back to. Credit ratings go down and now cities/towns must cut vital services due to this one way capital flow. And the cycle keeps going.

[Neoprime]

Add with jbeard, recessions are also cause by capitalist making products in advance and not knowing how they will fare or how much money/profit they'll make in return, mostly because the products made were not demanded by consumers so nobody buys the products and if they invested too much they sink hard and these conditions spread in certain regions in society thus creating recession and if it furthers it can lead to a depression. This is my point of view anyway.

[Revolution starts with U]

Add with jbeard, recessions are also cause by capitalist making products in advance and not knowing how they will fare or how much money/profit they'll make in return, mostly because the products made were not demanded by consumers so nobody buys the products and if they invested too much they sink hard and these conditions spread in certain regions in society thus creating recession and if it furthers it can lead to a depression. This is my point of view anyway.

Class antagonism all but assures that, at some point, there simply will not be enough economic demand for these products; ie, crash is inevitable. Wages go up, merchants see more demand and so make more product. But as wages go up, profits go down, so people get fired. Demand goes down.

[Dean]

Per Neoprime, product gluts can cause recessions, but I don't think that it causes major ones. The solar panel industry is having this problem right now.

jbeard has some good points, but there is a fundamental aspect of capitalism which will always create these crises. That is the need for profit, in the form of arbitrage schemes. An arbitrage scheme is simple: the purchase of a good or service with the intent to resell it back at a higher rate. While the term usually refers to a more specific financial method, it is the best description of what we need to talk about.

Without differences in cost, arbitrage, and therefore capitalism, would not work. Capitalism requires inequality of all sorts. These differences come about for a number of reason: the classic example is the disproportionate power that owning capital provides to a capitalist versus a worker in the process of production. Other examples are different nations with different regulatory environments. The one relevant here is the difference in prices over time.

This difference in prices is often exploited in so-called "pump - and - dump" schemes where capitalists purchase financial products like stocks in large quantity, driving up its value, and then sell them off once the value has reached a profitable level. Some high frequency traders do this in short time frames, while most traders use drawn-out processes to turn a profit.

The point is that a recession benefits the capitalists in many ways. Expaned unemployment lowers the bargaining power of labor, and the value of labor, and when the growth economy returns this power and value is only given back at a fraction of what was lost. Recessions also allow the capitalists to thin their own ranks - in the recent recession, half of all millionaires lost the privilege to be called millionaires - those who were left ended up with more net worth collectively, however, which means that those millionaires more than doubled their net worth on top of weathering the storm!

Its important not to look at a recession as a problem for all of the classes. The disproportionate cost of the recession has been under reported, but the black population has lost most of its assets during it. The median Black family now has 1/4th the net worth of the median White family - this used to be 1/2 before the recession. Keep in mind that the median White family lost net worth, too. And the ultra-rich have done quite well for themselves, despite managing the financial tools responsible for this engineered collapse.

[Lobotomy]

The disproportionate cost of the recession has been under reported, but the black population has lost most of its assets during it. The median Black family now has 1/4th the net worth of the median White family - this used to be 1/2 before the recession.

source? (I don't necessarily doubt it, but I'd like to read about it)

[daft punk]

Capitalism has always had it's 'business cycle'. The basic thing is that the capitalists extract a profit, so the workers dont get paid enough to buy back what they have produced, especially when inequality is increasing. The interests of an individual capitalist, to extract maximum profit, are against the interests of the economy as a whole. This is the basic contradiction in capitalism, as I understand it.

The classic description is the Money Trick:

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[robbo203]

Capitalism has always had it's 'business cycle'. The basic thing is that the capitalists extract a profit, so the workers dont get paid enough to buy back what they have produced, especially when inequality is increasing. The interests of an individual capitalist, to extract maximum profit, are against the interests of the economy as a whole. This is the basic contradiction in capitalism, as I understand it.


No, this is not really what causes recessions. What you are proposing here is a type of "underconsumptionist" theory . But the idea that workers dont get paid enough to buy back what they produce overlooks that if the workers' share of the social product goes down then the capitalists share goes up (and vice versa) meaning that the capitalists have more money to spend even if the workers have less. This is basically the same argument Marx employs in Value Price Proft against "Citizen Weston" who felt that wage increases would push up prices. They dont - they simply cut into profits.

http://www.marxists.org/archive/marx/works/1865/value-price-profit/


One or two other points. Firstly it should be noted that far from an insufficiency of wages beong the cause of crises Marx pointed out that, actually, crises tend to be preceded by a sharp rise in wages. Secondly within the context of capitalism it makes little sense to talk about workers not being paid enough to buy back what they produce. Part of what they produce , for instance , are means of production. If hypothetically they were to be exacrly paid what they produce there would obviously be no funds available for investment unless of course workers were to fund investment out of their wages themselves in which case there would be no capitalist class and hence no capitalism. But this is simply to talk hypothetically

The primary reason for crisis as some contributors have hinted aready is disrproportional growth between different branches of industry, leading to overshoot situations and subsequent layoffs with knock on consequences for other branches of industry. This is the Marxian disproportionality theory of crises

There is an excellent study guide produced by the SPGB education dept which goes into these matters in some depth. Whilst there you might want to look at some of their other study guides

http://www.worldsocialism.org/spgb/education/study-guides/study-guide-economic-crises