The history of capitalism shows us that the periodic recurrence of crises is not a function of the working class’s strength or combativity, of ‘mistakes’ in economic management, or even of ‘parasitism’ in society.footnote^＊ The tendency towards crisis is indissolubly linked to the existence of capitalism itself. It is a result of the contradiction between the goal of capitalist accumulation (the valorization of capital and the appropriation of surplus-value by capital) and the means by which this goal is pursued (growth in social productivity and the development of the social character of production). Social productivity is increased continuously by mechanization and the division and reorganization of labour, not in order to satisfy the needs of the producers, but in order to increase the proportion of the social product which accrues to capital instead of being passed on to the producers. This process has a contradictory effect on society’s ability to consume and produce. Whilst production (whose growth depends principally on the proportion of the social product which goes to the capitalists and is transformed into means of production) tends to increase, consumption (whose growth depends principally on the proportion of the social product which goes to the workers and which is transformed into means of consumption) tends to contract.

Commodities produced using the means of production in which capital has been invested are thus always in danger of remaining unsold because of the restricted base of consumption under capitalism. From this spring what are called realization crises. The surplus-value which labour produces and incorporates in commodities is not realized—in other words, it does not form profit—because part of the commodities in question either remain unsold or can only be sold at such low prices that potential profit is reduced or nullified. In this case, the crisis occurs because the rate of exploitation (the relation between the portion of social product which is appropriated by capital and the portion retained by the workers) is ‘too high’ to allow the realization of surplus-value.

If for any reason, on the other hand, the rate of exploitation does not rise and stays constant (or even falls), accumulation no longer tends to run up against over-restricted consumption, since workers’ incomes rise in step with productivity. In this case, accumulation runs up against the limits set by the fall in the rate of profit (the ratio of profit to invested capital). A constant (or diminishing) proportion of the social product is insufficient to remunerate, at a constant rate, the ever-increasing mass of capital that the capitalists have to invest per unit of product. If exploitation stays constant (or falls), the rate of profit falls with capital intensity in production.footnote¹ There is hence a tendency for a reduction in accumulation to take place, because the capitalists do not get the returns they expected from their investment. In this case, the crisis is brought on because the rate of exploitation is ‘too low’ for an ‘adequate’ remuneration of capital.

In both cases the crisis is manifested as a fall in the rate of profit and overproduction of commodities: in the first case (rate of exploitation ‘too high’) the rate of profit falls because there is overproduction of commodities and surplus-value cannot be completely transformed into profits; in the second case (rate of exploitation ‘too low’) there is overproduction because the fall in the rate of profit brings about a diminished demand for means of production. In spite of this apparent similarity, there is an important difference between the two situations. In the first case, overproduction (and the fall in the rate of profit) is greater in the sectors which produce wage-goods (goods consumed by the working class) and the means of production needed to make these goods. Capital therefore tends to migrate out of these sectors, and the social product ends up containing a lower quantity of these goods and a larger proportion of goods consumed by the bourgeoisie and unproductive social strata. In the second case, the opposite takes place. In other words, there will be a crisis both with a rate of exploitation which is ‘too high’ and with one which is ‘too low’. But the final outcome of the crisis in each case is different. In the first case, its weight will fall on the working class; in the second, it will fall on capital and on unproductive social strata. It is important to analyse the factors which determine the rate of exploitation, in order to discover not the reason for crises, but who will have to bear their costs.

The rate of exploitation, in particular, depends on the relation of forces between labour and capital. One of the primary factors determining this relation of forces is the scale of concentration of capital. The wage-earners, both when they sell their labour power and when they buy what is needed for their own existence, confront a class which—by virtue of its monopoly of the means of production—deals with them from a position of strength. Nevertheless, this position of strength is weakened by the effects of intercapitalist competition. In particular, competition tends to conflict with raising the rate of exploitation, which means that the contradictions of capitalist accumulation are manifested principally in a fall in the rate of profit. This tendency can be illustrated with reference to the general crisis which shook capitalism, when it was still predominantly competitive, towards the end of the last century (1873–96). During those two decades there was no sharp fall in investment, production or employment. If anything, these tended to fluctuate less sharply. What did fall rapidly was the level of prices, which tended to go down much more swiftly than that of money wages. Real wages (taking into account the cost of living) thus tended to rise, whilst the rate of profit fell continuously.

These tendencies can be explained, above all, by the low level of concentration of capital and the powerful competitive drives which characterized the capitalism of this epoch. Under such conditions, from the standpoint of the defence of profits, the individual capitalist could gain nothing by cutting back production and investment in the hope of seeing better prices after a reduction in supply. In effect, market prices were not regulated by the level of supply or the production costs of individual capitalists, but by the global level of supply and by average costs of production in the sector—over which each capitalist, taken individually, had little influence. Individual capitalists could only try to survive by stealing a march on their competitors: either by cutting prices (thus forcing others to bear the brunt of overproduction) or by improving techniques of production and reducing their own average costs (thus forcing others to bear the brunt of the fall in the rate of profit).

This is the basic reason why, in a strongly competitive system, wages are not attacked on two fronts (direct attack on wages and indirect attack via prices). A crisis is a time of respite, and creates favourable conditions for wage labour on the ‘prices front’. Furthermore, because of the limited extent of cutbacks in production, a crisis does not dramatically increase the threat of unemployment, hence does not sap the fighting capacity of the workers on the ‘wages front’. Competition between capitalists thus serves as a ‘defence’ for wage-earners in times of crisis. It reduces the tendency of the rate of exploitation to rise and accentuates the tendency of the rate of profit to fall. However, this ‘defence’ is eroded as capitalist accumulation proceeds. In fact, if we discount short and medium-term fluctuations in the intensity of competition (for example, its tendency to intensify when the rate of profit falls), it depends mainly on the scale of concentration of capital, which increases constantly as accumulation advances.