Does Capitalist Production Have a Long Cycle? (pt 6)

Germany and the super-crisis of 1929-33

The super-crisis of 1929-33 is eminently bound up with events, both economic and political, in Germany. Let’s review the events that were to end with the transformation of the German Wiemar Republic into the Third Reich. The roots of these terrible events lie deep in the years before World War I.

For many decades before the outbreak of World War I, there had been a steady erosion of Britain’s industrial powerrelative to the industrial power of the other major capitalist powers, especially Germany and the United States. At a certain point, the continued financial, military and political domination of Britain was in such contradiction to the vastly reduced weight of its industry, British overlordship simply could not continue. Something had to give.

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Ricardo’s Theories Challenged by the Crises of 1825 and 1837

Shortly after Ricardo’s death, the crisis of 1825, the first global crisis of overproduction, swept over Britain. In 1837, a second global crisis erupted with far more devastating results. It was followed by years of industrial depression and mass unemployment. Stormy class struggles broke out, and in Britain out of this came the Chartist Movement, the first mass working-class political party. It was during the depression that followed the crisis of 1837 that Marx and Engels were themselves radicalized.

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Ricardo’s Theory of International Trade

Over the last few weeks, I have been examining a “typical” industrial cycle. For sake of simplification, I have assumed the world was a single capitalist nation. In order to do this, I have abstracted the effects on the industrial cycle of the division of the capitalist world into different countries and currencies. But in reality, the capitalist world has always been divided into many nations and currencies. Therefore, no theory of real industrial cycles and crises can be complete without a theory of international trade and exchange rates.

Our starting point will be the theory of international trade put forward by the great English classical economist David Ricardo (1772-1823). The Ricardian theory of international trade is called by the modern bourgeois economists the theory of comparative advantage.

The theory of comparative advantage dominates the theory of international trade taught in the universities to this day. It forms the basis of the claim of neoliberal economists that free trade operates to the advantage of every nation, the capitalistically advanced nations as well as the capitalistically underdeveloped or oppressed nations. It is, therefore, particularly popular among neoliberal economists such as the followers of Milton Friedman. For reasons that will become apparent in the coming weeks, bourgeois economists inspired by the theories of John Maynard Keynes tend to be more critical of “comparative advantage” and “free trade” in general.

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