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New Left Review I/90, March-April 1975


Ernest Mandel

The Industrial Cycle in Late Capitalism

It is well known that ever since large-scale capitalist industry achieved domination of the world market, its development has assumed a cyclical character, peculiar only to this mode of production, with successive phases of recession, upswing, boom, overheating, crash, depression and so on. Although Marx left no finished theory of the industrial cycle and crises of overproduction, it is possible to derive the broad outlines of such a theory from his most important writings. Marx himself explicitly rejects any monocausal explanation of crises, insisting that they are a combination of all the contradictions of the capitalist mode of production. In this sense the cyclical movement of capitalist production undoubtedly finds its clearest expression in the cyclical movement of the average rate of profit, which after all sums up the contradictory development of all the moments of the process of production and reproduction. An economic upswing is only possible with a rising rate of profit, which in its turn creates the conditions for a fresh extension of the market and an accentuation of the upswing. At a certain point in this development, however, the increased organic composition of capital and the limit to the number of commodities that can be sold to the ‘final consumers’ must lower the rate of profit and also induce a relative contraction of the market. These contradictions then spill over into a crisis of over-production. The falling rate of profit leads to a curtailment of investments which turns the downswing into a depression. The devalorization of capital and increasing rationalization and unemployment (which lift the rate of surplus value) permit the rate of profit to rise once more. The decline in output and depletion of stocks permit a new expansion of the market, which combines with the recovery of the rate of profit to restimulate entrepreneurial investments, and hence to launch an upswing in production.

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Ernest Mandel, ‘The Industrial Cycle in Late Capitalism’, NLR I/90: £3
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