Crisis (economic)

Crisis theory, concerning the causes and consequences of the tendency for the rate of profit to fall in a capitalist system, is now generally associated with Marxian economics.

Earlier analysis was provided by Jean Charles Léonard de Sismondi who provided the first suggestions of its systemic roots. John Stuart Mill in his "Of the Tendency of Profits to a Minimum" which forms Chapter IV of Book IV of his Principles of Political Economy and Chapter V, "Consequences of the Tendency of Profits to a Minimum", provides a conspectus of the then accepted understanding of a number of the key elements, after David Ricardo, but without Marx's theoretical working out that Engels posthumously published in Capital, Volume III.

A survey of the competing theories of crisis in the different strands of political economy and economics was provided by Anwar Shaikh in 1978.

Marx's crisis theory was only partially understood even among leading Marxists at the beginning of the twentieth-century. His notes ‘Books of Crisis’ [Notebooks B84, B88 and B91] remain unpublished and have seldom been referred to. A relatively small group including Lenin and Rosa Luxemburg attempted to theoretically defend the revolutionary implications of the theory, while others, first Eduard Bernstein and then Rudolf Hilferding, argued against its continued usefulness.

It was Henryk Grossman in 1929 who most successfully rescued Marx's theoretical presentation ... ‘he was the first Marxist to systematically explore the tendency for the organic composition of capital to rise and hence for the rate of profit to fall as a fundamental feature of Marx's explanation of economic crises in Capital.' Apparently entirely independently Samezō Kuruma was also in 1929 drawing attention to the decisive importance in Marx's writings and made the explicit connection between Crisis theory and the theory of imperialism.

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