The Cyclical Chronology

B. The Cyclical Chronology

Marx in Capital 1 describes the decade 1820–30 as one in which “modern industry itself was only just emerging from the age of childhood, as is shown by the fact that with the crisis of 1825 it for the first time opens the periodic cycle of its modern life” (MECW 35: 14–15). More specifically, “[t]he course characteristic of modern industry” is “a decennial cycle (interrupted by smaller oscillations), of periods of average activity, production at high pressure, crisis and stagnation . . . ” (627); or again, “the periodic changes of the industrial cycle are characterized by “its decennial cycles and periodic phases, which, moreover, as accumulation advances, are complicated by irregular oscillations following each other more and more quickly . . . ” (631).

The categorization in terms of “average activity, production at high pressure, crisis and stagnation” is impressionistic. It is not always clear whether by “crisis” is here intended the upper turning point alone with “stagnation” or “depression”

The Cyclical Dimension

referring to the period preceding the upturn, or whether it includes all or part of the recessionary period. 2 The term “crisis” possibly includes “stagnation” in a reference to “the period of the crisis from 1857 to 1858,” and is certainly so used in the context of “the frightful cotton crisis from 1861–1865” (249). But this may not be true of an observation relating to the cotton trade between 1770–1815 (a period of British export monopoly) which experienced “only 5 years of crisis and stagnation” (461).

The period 1770–1815 is contrasted with that of 1815–63 – competition from Europe and the United States setting in between 1815 and 1830 – which experienced “20 years of revival and prosperity against 28 of depression, and stagnation;” or more narrowly, with 1846–63 and its “8 years of moderate activity and prosperity against 9 years of depression and stagnation” (461–2). Here a four-phrase period- icity entailing revival (and probably moderate activity), prosperity, depression, and stagnation, is implied and should be compared with our original, equally imprecise, pattern of “average activity, production at high pressure, crisis, and stagnation.” Similarly, in discussing capital accumulation Marx writes of “crisis” as a “phase” indicating depression, considering the parallel made with “prosperity”: “ . . . when the industrial cycle is in the phase of crisis, a general fall in the price of commodi- ties is expressed as a rise in the value of money, and in the phase of prosperity, a general rise in the price of commodities, as a fall in the value of money” (615). Yet elsewhere in the same chapter “crisis” is used in a sense paralleling “revival”: “One need only glance superficially at the statistics of English pauperism to find that the quantity of paupers increases with every crisis, and diminishes with every revival of trade” (637) – suggesting upper and lower turning points respectively.

Volume 3 contains a description of cycles, representing them as comprising “state of inactivity, mounting revival, prosperity, overproduction, crisis, stagnation, state of inactivity, etc. . . . ” (MECW 37: 358), where crisis is unambiguously used in the sense of upper turning point. Strangely, there is no formal emphasis on a “decennial” pattern as such in the posthumous volume.

Despite the sometimes loose terminology we need not be held up unduly when considering the perceived “decennial” periodicity of British industrial activity – using as proxy labor conditions in the cotton industry – for Marx does focus in most cases on a specific “crisis-year” which implies an upper turning point – 1825, 1847, 1857, 1866 – each followed by “misery” or depression; only with regard to 1837–38 does he refer to “depression and crisis.” Also indicative of crisis as upper turning point is the account of 1857 as the year that “brought one of the great crises with which the industrial cycle periodically ends,” and of 1866 as “[t]he next termination of the cycle” (MECW 35: 660–1; emphasis added).

This then, at least up until 1866, is the chronology of Marx’s decennial cycli- cal pattern with crisis years (the upper turning point) following upon peri- ods of “prosperity” – or more specifically of “production at high pressure” or “overproduction” – and followed by depression, stagnation, and then revival.

137 The problem we face is that Marx’s chronology turns on qualitative descriptions

B. The Cyclical Chronology

not quantitative series which makes interpretation extremely difficult. Particularly troublesome in this regard is the distinction between the primary cyclical pattern and “smaller” and “irregular oscillations.” For that the minor oscillations follow each other “more and more quickly” is not evident from the dating provided; all we have to go on are the “glutted markets” and “distress” setting in in 1830 and the continued depression 1831–33 that disturb the pattern of (decennial) cyclical expansion of 1827–29 and 1834–36; the depression years 1840–43 that disturb the expansion beginning in 1839 and continuing through 1844–46; and the depres- sion years 1851 and 1854 that disturb the expansion 1849–56. As for the 1860s, the recovery after the decennial crisis of 1857 (or 1857–8) begins in 1858 and prosperity continues into 1861 which may indicate the upper turning point of a minor cycle; in any event, a downturn sets in with the “cotton famine” reflecting the American Civil War – which lasts through to 1863 (and even 1865 on one account). Now the decennial crisis is said to occur in 1866, so one must suppose there to have been some recovery after 1863 (or 1865). But the decennial crisis of 1866 itself is something of a special case, taking on “an especially financial character” as a result of the effects of the cotton crisis (see below, p. 152).

Marx himself was sufficiently confident in his periodization based on the years 1825–66 that in January 1873 in the Afterward to the Second German edition of Capital 1, he forecast, with emphasis upon its universality, a new crisis to occur (presumably) in 1876–77: “The contradictions inherent in the movement of cap- italist society impress themselves upon the practical bourgeois most strikingly in the changes of the periodic cycle, through which modern industry runs, and whose crowning point is the universal crisis. That crisis is once again approaching, although as yet but in its preliminary stage; and by the universality of its theatre and the intensity of its action it will drum dialectics even into the heads of the mushroom-upstarts of the new, holy Prusso-German empire” (MECW 35: 20). 3

The chronological pattern is revealed more sharply by reference to the course of the interest rate. In what follows we keep in mind Marx’s generalization in Volume 3

3 The French edition of Capital 1 (see above, Introduction, p. 5) contains an important passage in the chapter “The General Law of Capitalist Accumulation” not appearing in the MECW

edition: But only after the mechanical industry had struck root so deeply that it exerted a preponderant

influence on the whole of national production; only after foreign trade began to predominate over internal trade, thanks to mechanical industry; only after the world market had successively annexed extensive areas of the New World, Asia and Australia; and finally, only after a sufficient number of industrial nations had entered the arena – only after all this had happened can one date the repeated self-perpetuating cycles, whose successive phases embrace years, and always culminate in a general crisis, which is the end of one cycle and the starting-point of another . . . . (Marx 1976: 786; see also Marx 1963: 1150).

There seems to be considerable jobbing backwards here, since the cyclical pattern is usually

The Cyclical Dimension

that while “the average rate of profit is to be regarded as the ultimate determinant of the maximum rate of interest,” the interest rate itself might vary cyclically in opposite directions:

If we observe the cycles in which modern industry moves – state of inactivity, mounting revival, prosperity, overproduction, crisis, stagnation, state of inactivity, etc., . . . – we shall find that a low rate of interest generally corresponds to periods of prosperity or extra profit, a rise in interest separates prosperity and its reverse, and a maximum of interest up to a point of extreme usury corresponds to the period of crisis. The summer

of 1843 ushered in a period of remarkable prosperity; the rate of interest still 4 1 / 2 % in the spring of 1842, fell to 2% in the spring and summer of 1843; in September it fell as low as 1 1 / 2 % . . . ; whereupon it rose to 8% and higher during the crisis of 1847 (MECW

37: 358). . . . Again: “The demand for money capital,” as in the 1847 money crisis, and

consequently the interest rate, “may rise even though the profit may decrease; as soon as the relative supply of money capital shrinks, its ‘value’ increases” (418). In fact, “[i]n this case the interest rose because profits decreased and the money values of commodities fell enormously” (419).

More generally, depression itself is characterized by ample loanable funds or “loan capital [lying] idle in great quantities” because of slack demand for loans (484; see below, p. 155). During the initial stages of recovery (or “improvement” as it is sometimes referred to, cf. 488), the interest rate rises above its minimum but to no great degree since renewed activity is largely accommodated by commercial credit (487). However, the situation alters with the onset of “overexertion,” a period of great expansion in fixed capital and “new enterprises” coupled with wholesale reliance on money credit by increasing numbers of “cavaliers” or purely speculative investors, both acting to increase the interest rate “to its average level”: “On the other hand, those cavaliers who work without any reserve capital or without any capital at all and who thus operate completely on a money credit basis begin to appear for the first time in considerable numbers. To this is now added the great expansion of fixed capital in all forms, and the opening of new enterprises on a vast and far-reaching scale. The interest now rises to its average level.” The interest rate continues to rise until “a new crisis sets in,” when “[c]redit suddenly stops . . . payments are suspended, the reproduction process is paralysed, and . . . a superabundance of idle industrial capital appears side by side with an almost absolute absence of loan capital.” 4

Convenient summaries bring out the major movements of the interest rate over the cycle. First, there is coincidence at its “beginning” – immediately after the crisis – of industrial contraction accompanied by an ample supply of loanable funds, evi-

4 The last statement is unhelpful, since MECW 37: 484 has it that loan capital “lies idle in great quantities” during depression; and again in what follows, it is confirmed that industrial

contraction coincides with an ample supply of loanable funds. The “almost absolute absence” thus must reflect the paucity of demand for loanable funds.

C. Trend and Cycle: Causal Mechanisms 139 dently relative to demand, “as expressed by the [low] rate of interest”; and at its

“end” – just before the crisis – of industrial expansion or rather “superabundance of industrial capital” accompanied by a limited supply of loanable funds (again rel- ative to demand) and high interest; and second, the coincidence in only two limited periods of an “abundance of loan capital” or low interest simultaneously with a great expansion of industrial capital” – the period just after the lower turning point when the interest rate has risen above its minimum, but remained low, and that somewhat later in the recovery when the average interest rate is achieved (488; 493). 5

It remains to emphasize that the cyclical movements are perceived as superim- posed upon an upward trend: “ . . . during the ten-year cyclical periods of develop- ment of British industry (1815 to 1870), the maximum of the last prosperity before the crisis always reappears as the minimum of the following prosperity, whereupon it rises to a new and far higher peak” (499; also below, pp. 143, 144).