Izielen Agbon
In the third stage of the circular movement of Capital, the finished product (C) which is the outcome of the production process becomes commodities and are offered for sale in the sphere of realization (commodity markets). Here, they are exchanged for money.
CI is the expanded capital in the commodity form. The expanded money capital (MI ) obtained from the sale of CI is ideally greater than the original money capital (M) advanced initially because (CI=C+c) where (c) represents surplus product from the surplus labour expended by workers during the production process.
CI must have a use value to be sold and the quantity of CI sold determines the amount of surplus value (s) recovered by the capitalist. (MI =M+m) and (m) is the money form of (c). MI as (M+m) hides the fact that capital can only generate value in the sphere of production.
CI – MI represents the transformation of the expanded commodity capital, as self-expanded capital value, from its commodity form into the money form. If CI is not transformed into MI, the production process is arrested and the original value contained in M, and changed into LP, MP, ..P.., and CI is destroyed.
If this transformation takes place, then capital value resumes the same form in which it began its circular movement; ready to repeat its circular movement again. MI, as self-expanded capital value, is the purpose, the outcome, the goal, and function of the total circular movement of capital.
There are many possibilities of crisis in the sphere of realization. In this sphere, the MI for the purchase of the self-expanded capital value (CI) might not be available. Secondly, CI might have a use value that is not desired by the consumers. Thirdly, production is carried out by many capitalists with no overall plan to co-ordinate supply and demand.
Hence, investment in constant and variable capital might not be equal to the means of production (MP) and the means of subsistence (MS) produced. Finally, the direct appropriation of the means of subsistence by workers and the means of production by capitalists (industrial espionage) might render the realization of surplus value through the sale of CI impossible. Therefore, we find that everywhere a separation exists within the overall unity, there exist the possibility of rupture in metamorphosis and hence the possibility of crisis.
There are also predispositions to crisis in the sphere of realization. First, the desire for social wealth ever pushes the workers to embark on direct appropriation of the means of subsistence. Meanwhile, accumulation with competition pushes the capitalists to engage in industrial espionage. Therefore, the possibility of the sale of CI not occurring tends to actualize. Secondly, there is a limit to the realization of any commodity because any commodity can only be consumed as objects of need to a certain point (i.e., satiation point).
Hence, the predisposition of capitalists to produce irrespective of the limits of the market results in a predisposition to overproduction, deflation and thus crisis. Another predisposition exists because need is not equivalent to demand, so even if a need exists, the lack of money to purchase the desired commodity could lead to a lack of effective demand (e.g., underconsumption). Every capitalist sees every other capitalist’s workers as consumers while seeing his workers as a mere factor of production. Thus, every capitalist views the wages of his workers as part of the production cost and therefore struggles to reduce them to an acceptable minimum to ensure normal profits.
So, capitalists tend to reduce or slow down the increase in wages. On the other hand, every capitalist is pushed by the demands of his own workers to produce at maximum potential (at the highest possible productivity and capacity). This tendency to produce beyond the limit of the market constitutes a predisposition to crisis in the sphere of realization.
4. Moments of Crisis and the Circulation of Breakdown
We have examined the possibilities and predisposition of crisis in the circular movement of capital in previous articles. Here we will look into the moments of crisis and circulation of breakdown.
There are two moments of crisis. In the first moment, a cycle of struggles of the working-class results in their higher level of power and disrupts capitals’ attempts to accumulate itself on an expanded scale. The power of the working class, in this period, ruptures its very existence as a working class and capital’s control of the society as a whole. The working-class struggles become generalized, becoming a political movement of the class-for-itself against capital. The interests and goals of the working class become political demands imposed on capital by force, resulting in political instability for capital. In this first moment of crisis, the working class has the initiative and imposes conditions that make the maintenance and smooth expanded self-accumulation of capital impossible.
The second moment of crisis constitutes capital’s response to the crisis imposed on it. Capital struggles to regain control of its imposition of work and to reassert its power. Using the existing conditions of crisis, capital attempts to overcome the crisis by unleashing strategies directed at decomposing the power of the working class. New divisions (race, sex, ethnicity, work, education, religion, location etc) are imposed on the working class and the accumulation process is restored.
If we understand economic development as a process of class struggle, then the first moment of crisis is a stage where economic self-development for the working class has great potential of immediate actualization. Economic development, understood from this point of view, as capital’s maintenance and accumulation of itself, is on the verge of being eliminated. In the second moment, capital restores its development as its smooth expanded accumulation and imposes this as underdevelopment on the working class. The strategies utilized by capital to impose crisis as recovery is a function of the form in which the crisis exhibits itself (i.e. either as industrial or commercial crisis).
The occurrence of crisis in any stage of the circular movement of capital can lead to generalised crisis. For instance, a breakdown in the sphere of realization (CI-MI – conversion of increased commodities to increased capital) of one circuit results in unsold products, excess inventory, and a cutback in production. The reduction in production implies that some workers could be fired which further reduces the demand for commodities. Other commodities may also loose demand as higher unemployment results in oversupply of labour and a reduction in wages. Thus, general overproduction can result.
Overproduction in the leading sectors can also result in general overproduction because of the circulation of this breakdown to other sectors. A breakdown of conversion of commodities to capital (CI-MI) in the leading sectors implies that the cutback in production (or reduction of factor inputs) would result in the relative overproduction of the factor inputs. The capitalists producing the factor inputs as commodities or outputs would be faced with reduced sales and a cutback in their production. Thus, the crisis can circulate from leading sectors to other sectors until overproduction becomes general.
If there is an overproduction of the means of production (MP), then some workers in Department I would be fired, leading to higher unemployment, lower wages and declining demand for the means of subsistence (MS). The unemployment effect of lower wages can result in intensified class struggle, social instability and relative unlimited supply of labour. The intensification of the class struggle can also occur as a result of workers’ resistance, to the reorganization of work and the break-up of workers’ power which the introduction of more and new means of production (MP) entails. The creation of heterogeneity in the working class with the successful introduction of new divisions signals the beginning of the second moment of crisis; of crisis as recovery for capital.
Capital often uses crisis as recovery. In the case of a commercial or industrial crisis, capital may intervene through the state with the aid of monetary and/or fiscal policies. A tax rebate and an increase in government spending or money supply may help overcome a commercial crisis in the face of a credit system failure or collapse. Industrial tax credits, a wage freeze, and the imposition of industrial peace by the coercive arms of the state (the police and the armed forces), may also overcome an industrial crisis.
In crisis conditions, capital can conduct and regulate an unholy war of cut-throat capitalist competition through the state apparatuses. The state decides which companies get weeded out and which get saved by the state. During the second moment of crisis, capital destroys the power base of the working class and restores its control of the imposition of work. Therefore, crisis becomes functional to capital and restores the basis of its expanded accumulation.
There are offsetting factors to any crisis. These offsetting factors include new credit, foreign direct investment, expansion of foreign trade, creation of new markets, increasing the quality and durability of the means of production, adulteration of the means of subsistence in order to reduce its price, the reduction of wages, the reduction of waste, economy of scale, the imposition of new divisions of labour, the elimination of safety measures at the point of production, and an increase in the intensity of work as well as the organic composition of capital. These offsetting factors tend to lengthen the periodicity of the actualization of crisis.
Previous articles in this series can be found here:
