NOWADAYS, crisis has become a very common connotation in the popular realm while talking about the economy. Though, the debate over the nature of crisis persists. At the same time, there exist doubts over the impact of the crisis as capitalism is successfully surviving till date, overcoming all periodic cycles of criticality.

Crises in the capitalist mode of production appear due to the discontinuation-rupture in the production and circulation (exchange) processes of the commodities. It originates from lowering of investment in production and lowering of consumption in circulation. It results in the coexistence of piled-up unsold goods and unmet-unsatisfied wants. This is the Crisis of overproduction and not of the scarcity, distinguishably different from the crises arising out of natural calamities or war.

In this article, we will try to see some of the economic markers of the crisis and their peculiar historic interrelations. We will trace the coordinates of these parameters in the connection of the crisis.

RATE OF GROWTH

The rate of growth of economy is the most generalised and popular parameter for measuring the economic progress of a society. The World Bank data shows that the average GDP growth rate in the first phase of the neoliberal period (1991-2007) was 3.22 per cent, which came down to 2.72 per cent during the period between 2008 crisis and Pandemic (2008-2028) and in the post-Pandemic time, the growth is hovering around 2.40 per cent. 2024 ended with six out of top seven capitalist countries under stagnation or recession! Certainly, it’s a bleak world economic scenario.                             

Growth originates from the investment of the capital. The Foreign Direct Investment (FDI), a major parameter of capital investment by the private sector, was 2.41 Trillion Dollar in 2021, in 2022 it came down to 1.88 Trillion Dollar and in 2023, it further came down to 0.87 Trillion Dollar (almost one-third of 2021). And this is not only a post-Pandemic or temporary phenomenon. The net investment in nonfinancial assets as a percentage of GDP is secularly falling since 2008; the data attached can easily portray that. 

But what does the lowering of investment express? The capitalist system is driven by the thirst of profit. If the rate of profit from production related investment is temporarily higher, the investment will be robust; during the fall of the profit rate, the money is hoarded by the capitalists; this phenomenon is the origin of crisis in the capitalist system.

Now, if we check the historic data of the rate of profit, we can see a peculiar trend. There is a consistent trend of fall in the general rate of profit; the crunches can be seen in 1983, 1992, 2000 (Y2K Crisis), 2008 (Sub-prime Crisis) and after that, long depression with a deep in 2015. Clearly, the Crisis has a cycle of 7-8 years! 

The rate of production-linked profit depends upon the rate of surplus extraction and the proportion of wage to the invested total capital. If the percentage increase in rate of surplus is less than the percentage decrease in the proportion of wage to total capital i.e., the increase in the advancement in technology and infrastructure, the rate of profit will fall.

In the neoliberal period, the global wage share has faced a steep fall of 7 per cent whereas just 10 per cent of workers receive nearly half of the global pay blatantly expressing the acute destitution of 90 per cent of the global workforce. The gradual competitive fall in wage share with more and more automation induced enhanced productivity might have provided some temporary transitional rise in the rate of profit for some big-monopoly capitalist firms enhancing the rate of accumulation through concentration and centralisation, but the whole capitalist economy inexorably has entered into an unprecedented crisis.   

Strikingly, with the rise and fall of the rate of profit, the pattern of accumulation of capital also changes. The Gross Fixed Capital Formation (GCFC) signifies the new investment in machinery and infrastructure, which is nothing but the outcome of accumulation of capital. The historic plotting of GCFC as a percentage of GDP shows an accurate but opposite pattern match with the rate of profit curve. It means, when there is highest investment in fixed capital, the general rate of profit falls. Obviously, it shows that, profit originates from surplus of human labour, not machines! 

So, when capital accumulation is the highest, profit rate comes to the lowest and the crisis starts. It happened in 2000, 2008, 2015 and 2021; certainly it shows that, the periodicity of the crisis cycle is shortening, thus representing the systemic nature of it.

Actually, accumulation increases the productiveness of the capital through automation, which is bound to create a negative pressure on the profitability in long run. Along with that, the sudden need for new investments opens up the necessity of new industries as well as markets, and hence depletion in the volume of reserve army of workers takes place. It simultaneously generates a push-back force on the general economic profitability of the system as whole. Accumulation lusts for further accumulation and depresses the general profitability of the economy pushing the capitalist system towards more crises.

SPECULATIVE VS

REAL ECONOMY

 When the rate of accumulation is the highest, the investment in production related activities is saturating and the production linked profit rate is falling, there will be tendency of investment in the speculative markets. The peculiarity of the current stage of capitalism is that, here the speculation related investments may amass higher rate of return for a temporary period and the expectation to pull in more profit from future products can attract more investment. This investment is majorly focused around the interests, rents and all other forms of accumulation through encroachment-coercion; it is clearly an era when expropriation has taken over appropriation, the virtual takes over the real.

Stock trading is the measurement of the speculative investment; if it is measured as percentage of the real GDP, a very interesting picture emerges. 

Strikingly, the years of the highest accumulation and the lowest profit rates are the years when speculation reaches its peak and starts to fall. The phenomenon is called the “Bubble Burst” in the common market language.

While the general rate of profit falls, the crisis erupts, the monopolies tries to survive by extracting higher monopoly profit rate, and thus marginalizing smaller companies. Through this process, the big companies swallow the smaller one and try to evade the Crisis.

Here we have put the worldwide merger and acquisition chart. It shows that during the years of crisis, the amount of mergers reached peaks; so the merger process also has a periodicity very similar to the other parameters of crisis. And obviously these are integrally linked parameters to assess the dynamics of capital. 

Undoubtedly, the crisis in the capitalist system is a reality, it has a periodicity and thus a logic. Certainly, the capitalist system is entering into deeper crisis every moment. Unlike the global crisis of 1870s and of 1930s, the current crisis grievously precipitated as the crisis ‘of’ capitalism rather than being the crisis ‘in’ capitalism. It is an explosion of neoliberal accumulation model, when economic globalization has engulfed the entire global-market demolishing all the escape-routes. This current neoliberal order has expanded its claws over the entire capital-labour and society-nature ecosystem dreadfully dismantling the provisions of sustainability and reversibility of the system.

For the first time in the history of capitalism, a crisis has emerged which has grotesquely affected all the realms of human civilization, the economic-political-societal-cultural-moral-institutional-ecological diasporas spreading all over the globe.

The modern age far-rightism/ neo-fascism is a global order where finance is not restricted within any national boundary and recession is increasingly deepening with continuous shifting of the crisis-center. Only through radical transformation of this social order, the contradiction between the neo-liberal-neo-fascist order and the people can be resolved permanently; in the meantime, we have to advance the struggle for alternative policies outside the ambit of neoliberal order.