Does Capitalist Production Have a Long Cycle? (pt 2)

The long semi-cycles of Ernest Mandel

We saw in earlier posts that most economic historians and economists, both bourgeois and Marxist, agree that the concrete history of the capitalist mode of production shows alternating periods of rapid expansion lasting for several decades followed by periods of much slower growth or semi-stagnation of varying lengths. There has been much dispute about whether these alternations represent cyclical forces operating from within the capitalist economy or are caused by changes of a non-cyclical nature in the “external” environment.

Among the Marxists, we saw that men as different as the U.S. socialist economist Paul Sweezy and Leon Trotsky agreed that the alternations between rapid growth and semi-stagnation are non-cyclical. If these alternations in long-term growth are non-cyclical, this would be in contrast to the the 10-year industrial cycle and the shorter, less-well-defined “Kitchin cycle,” where each stage in the cycle necessarily leads to the next stage.

Ernest Mandel was the leader of a faction of the “Trotskyist” current of Marxists. (1) He was somewhat embarrassed when rival Trotskyists pointed out that Trotsky himself had explicitly rejected the long-cycle theory. Retreating somewhat, Mandel chose to call the alternating long periods of alternating faster and and slower, or semi-stagnant, growth “long waves of capitalist development,” rather than “cycles.”

A wave, however—for example, a sine wave—still implies a cyclical process. (2) Mandel’s final thought-out views on this subject are best expressed in his short book entitled “Long Waves of Capitalist Development.”

“Marxists generally should not accept,” Mandel wrote, “a Kondratieff type of theory of long cycles [Mandel’s emphasis] in economic development, in which there is, in the economy itself, a built-in mechanism through which an expansive long cycle of perhaps twenty-five years leads to a stagnating cycle of the same length, which leads automatically to another expansive long cycle.”

After acknowledging here Trotsky’s criticism of Krondratiev, Mandel laid out his own views on the subject. “To state it more clearly,” Mandel wrote, “although the internal logic of capitalist laws of motion can explain the cumulative nature of each long wave once it is initiated [emphasis Mandel’s] and although it can also explain the transition from an expansionist long wave to a stagnating long wave, it cannot explain the turn from the latter to the former.”

Mandel therefore proposed a theory of long semi-cycles. Once the capitalist economy enters into a period of accelerated long-term growth—such as after the revolutions of 1848 or after World War II, to give two historical examples—forces are unleashed that bring the period of accelerated growth to an end after about 25 years, give or take a few years. To this extent, Mandel’s theory was in fact cyclical.

But once the long wave of accelerated growth gives way to a period of much slower growth, or semi-stagnation, there is no cyclical mechanism that pulls the capitalist economy out the state of semi-stagnation. This is in contrast to the cyclical forces that produce the 10-year industrial cycle.

Therefore, according to the theory developed by Mandel between the 1960s and his death in 1995, there is no reason why a “wave with an undertone of stagnation” couldn’t last to the very end of the capitalist mode of production. This would be true even if a workers’ revolution were not to occur for centuries.

But as a matter of history, at least through the “long wave of expansion” that set in right after World War II, each “long wave with an undertone of stagnation” has been followed by a “long wave with an undertone of expansion.” However, since Mandel’s long-wave theory was only semi-cyclical, it is indeterminate whether this will be true in the future.

The tendency of the rate of profit to fall and long semi-cycles

Early in these posts, I examined the proposals, widespread among Marxists today, that attribute the 10-year industrial cycle to the law of the tendency of the rate of profit to fall. Mandel applies the same law to the transition from the rapid growth wave to the semi-stagnant long wave.

A period of accelerated economic growth leads to an increase in the demand for the commodity labor power. This makes it increasingly difficult for the industrial capitalists to increase the rate of surplus value—the main method used by capital to resist the tendency of the rate of profit to fall—as labor market conditions swing in favor of working-class sellers of the commodity labor power. The industrial capitalists turn increasingly to machinery in an attempt to keep their cost prices down. As a result, the constant capital—factory buildings, machinery, raw and auxiliary materials—grow faster than the variable capital, the labor power the industrial capitalists purchase to produce surplus value.

Since only the variable capital—labor power—produces surplus value, the rate of profit falls as the constant capital grows faster than the variable capital. The rate of profit keeps on falling as long as the period of accelerated growth lasts. But it is precisely this fall in the rate of profit that ends the expansionary long wave, according to Mandel. (3)

Eventually, the rate of profit falls so much that capitalist investment slows down. Or, as the Keynesian economists say, there is a growing shortage of new—profitable—investment opportunities. The semi-stagnation across the industrial cycles will continue until, or indeed if, some non-cyclical factor temporarily overpowers the long-term tendency of the rate of profit to fall. When and if the rate of profit rises, investment—rate of accumulation—picks up, and a new wave of accelerated expansion sets in.

Mandel versus Schumpeter on innovation

Mandel as a Marxist agreed with the bourgeois long-cycle theorist Joseph Schumpeter that innovations—the introduction of new technologies and the rise of whole new industries—plays an important role during the long waves of accelerated growth. In contrast to Schumpeter, Mandel asserted in his book “Long Waves” that during long waves of semi-stagnation there is a low rate of investment “because profit expectations are mediocre.”

The result is that there is an increasing backlog of either unused, or at least severely under-utilized, inventions that represent the “raw material” of capitalist “innovations.” To transform new inventions into actual “innovations,” a high level of new investment in factories and machinery to actually produce the new types of commodities, or the new ways of producing existing commodities much more cheaply, must occur. (4)

Indeed, major innovations such as the steam engine, the automobile and the computer, just to name some of the best-known examples, created whole new industries. The development of new industries, however, requires more than new inventions. It also requires investment by the industrial capitalists to actually build the factories that produce the new types of commodities, whether these commodities consist of new items of consumption or new types of means of production. And under the capitalist system, major and risky investments—it is never obvious in advance exactly how large the market for a new type of commodity will actually be—will not be made without the prospect of a high rate and mass of profit.

Mandel as a Marxist, in contrast to the bourgeois marginalist Schumpeter, understood that profit—surplus value—arises from the unpaid labor of the working class. No invention, whether of the steam engine, the electric motor, the automobile, the computer, the microchip or the cell phone, can in and of itself produce an atom of surplus value.

Indeed, if the new inventions involve the creation of more powerful means of production, such as the steam engine or later the electric motor, the opposite will be the case. The invention of new types of labor-saving means of production that replace human labor when they become innovations applied to actual industrial production means that constant capital replaces variable capital.

Therefore, according to Mandel, before a major wave of innovation can occur under the capitalist mode of production, there must be a pre-existing rise in the rate of profit. Once the rate of profit rises, after a more or less prolonged period of capitalist semi-stagnation, the growing backlog of unused or underutilized inventions that accumulated during the long wave of semi-stagnation triggers a major wave of innovations. (5)

The growth of the productive forces then takes a leap forward. But as long as capitalism lasts, they also unleash the very force—the rise in the organic composition of capital leading to a fall in the rate of profit—that will bring the period of accelerated economic growth to an end.

Mandel’s long-wave theory therefore revolves around the difficulties of producing surplus value, not its realization. In his semi-cyclical long-wave theory, Mandel stands closer to Marxists like Henryk Grossman and Paul Mattick who emphasized the the difficulties of producing a sufficient amount of surplus value to prevent what is for capitalism a disastrous fall in the rate of profit, as opposed to those like Rosa Luxemburg and Paul Sweezy who emphasized the problems of realizing surplus value

Mandel on effective demand and long waves

In contrast to Paul Mattick (6), Mandel did not deny, however, that the difficulties of realizing surplus value might have a significant role to play in the “long waves” of accelerated growth and capitalist semi-stagnation. He noted in the final chapter of “Long Waves,” entitled “New Issues, New Clarifications,” included in the 1995 edition, that “from a Marxist point of view (which considers growth [expanded reproduction] as the unity of a process of surplus value production and a process of surplus value realization, the first by no means guaranteeing the second) [emphasis added—SW] a study of the fluctuations of ‘aggregate demand’ during long waves is a necessary and hitherto neglected component of long wave analysis.”

Changes in the level of gold production and long waves

This would have been a natural place to raise the question of what role changes in the value of money (gold) and the production levels of money material play in long waves. Mandel, however, did not do this and ignored this question completely in “New Issues, New Clarifications.”

He did discuss this question, however, in the first chapter of “Long Waves”: “The correlation between fluctuations in gold production and long waves of economic development has fascinated many economic historians,” he wrote. Mandel was aware that “gold production fluctuates in a ‘counter-cyclic’ manner in response to the ups and downs of the capitalist economy.”

This raises the question, could the sharp increases in gold production that have occurred periodically throughout the history of the capitalist mode of production be a factor, perhaps even the main factor, in the transition from a “stagnating long wave” to an “expansionary long wave”? Indeed, since Mandel himself points out the “counter-cyclical” tendencies of gold production—implying that the level of gold production is cyclical, could this be the “missing” material basis for the proposed long cycle.

Indeed, in his book “Late Capitalism,” Mandel attributes to the Dutch Marxist J. van Gelderen—who Mandel considers after Parvus to be the founder of long-wave theory—the view that an expansionary long wave “is typically preceded by a major increase in gold production” [not a direct quote of van Gelderen but a paraphrase by Mandel].

Mandel, however, though he is enthusiastic about van Gelderen’s support of the “long-wave” concept, does not seem to think much of his linking of “expansionary long waves” to rises in gold production: “He [van Gelderen—SW] failed to realize that the question of additional capital investments cannot be reduced to the production of money material (i.e., gold production) but constitutes a problem of the additional production and accumulation of surplus value” [emphases Mandel’s—SW].

Here it is Mandel who is confused. Before surplus value contained in a commodity can be transformed into capital—be accumulated—it must first be transformed into money—sold at a profit. The importance of this can never be underestimated. Surplus value that is not realized in the form of money is not profit. Unrealized surplus value cannot under the capitalist mode of production be accumulated, or what comes to exactly the same thing, be transformed into new capital.

In the final chapter of the 1995 edition of “Long Waves,” Mandel did seem partially to correct the mistake he made in his criticism of van Gelderen. (7) But in this chapter, Mandel ignored the whole question of the role that gold and gold production plays in the realization of the value of commodities in general, including the portion of the value that represents surplus value.

Overall, Mandel continued to play down the role of changes in the level of gold production in the replacement of eras of rapid capitalist expansion with eras of semi-stagnant capitalism and the converse replacement of periods of semi-stagnant capitalism with periods of rapidly expanding capitalism.

This in spite of the fact that unlike so many of our modern Marxists, as well as some Marxists from the era of the pre-World War I Second International such as, for example, Rudolph Hilferding, Mandel did not accept the claim that gold in its role as “real money” has been or can be replaced by “non-commodity” money. “A Soviet author,” Mandel wrote in “Long Waves,” “has followed the opinion of many American and international economists and technocrats concerning the possibility of ‘demonetizing’ gold, defending the idea that ‘credit money’ (bank credit) represents ‘real money’ which can play the same role as gold.” (8)

Mandel explained that such notions of non-commodity money are in contradiction to Marx’s “labor theory of value but also of what has been observed during recent years in the world market.”

Mandel, if he had lived, might well have paid more attention to the role that the ups and downs of gold production has played in “long waves.” He was the product of an era—the period that followed the Great Depression—when bourgeois “neo-Keynesians” as well as well-meaning “post-Keynesian” radical economists were claiming that “business cycles” could be tamed if gold money was replaced by “non-commodity” money.

The view therefore arose that non-commodity money should replace gold as the basis of the international monetary system and, it was held, can always be issued in quantities sufficient to either greatly weaken crises or even abolish them altogether. The role of gold as the only “real money” was—and still is—strongly denied among the great majority of bourgeois economists—whether pro-capitalist neo-Keynesians, radical “post-Keynesians,” or even reactionary neoliberal Friedmanites—who want to find ways to end crises without abolishing the capitalist system that breeds them.

Gold’s monetary role stands in the way of all the proposed polices to tame or abolish the “business cycle.” Many Marxists were—and still are—influenced by such ideas, which originate among bourgeois economists who try to find ways of abolishing the contradictions of capitalism without abolishing capitalism itself. Policies that promise to end the scourge of capitalist crises and mass unemployment—even if they are ultimately based on false premises and are doomed to fail—inevitably draw support not only from well-meaning middle-class reformers but from the trade unionists as well.

Gold production the material basis for the long cycle?

In examining the existence of a “Kitchin cycle” somewhat separate from the 10-year industrial cycle, I noted that this cycle seems to be governed by the movement of “commodity capital”—inventories—while the 10-year industrial cycle seems to be governed by the movement of fixed capital. (9) Could the “long cycle” be governed by the movement of the production of money capital in the form of gold?

I explained earlier in these posts, that the basic cycle of capitalist production is M-C…P…C’..M’. M appears at both the beginning and the end of the cycle. Money therefore forms both the “alpha and the omega,” both the starting point and the end point, of capitalist expanded reproduction.

Since capitalist production is not a system of simple reproduction but of expanded reproduction, the algebraic quantities represented by the letters—representing quantities of abstract human labor measured in terms of time—must become larger with each new turnover cycle. Therefore, both the M and the M’, just like the other terms in the formula, must get larger with each successive turnover cycle. (10)

It’s true that surplus M in the form of idle hoards of money may and indeed as rule does exist. But over time, the amount of money in existence must grow if the succession of turnover cycles, each involving greater amounts of capital—in the form of money capital, constant capital, variable capital, commodity capital, and at the end of each turnover cycle money capital once again—is to continue.

Each successive turnover cycle therefore begins with a sum of money capital and ends with a larger sum of money capital. If M at the beginning of the cycle is not present in sufficient quantities, the turnover cycle is stymied from the very beginning. If M is not present in sufficient quantity at the end of the cycle, the surplus value cannot be realized, thus making it impossible for the next turnover cycle to represent expanded as opposed to simple reproduction.

And as I demonstrated in the posts that dealt with money, the expansion of the total quantity of token and credit money—though these forms of money can and do replace gold itself in the turnover cycle—is itself ultimately dependent on the quantity of monetary gold that is in existence in a given country and on the world market as a whole. That’s because token and credit money doesn’t simply replace but represents—stands in for—the money commodity gold. This is why an industry that produces money material is absolutely necessary for the continued existence of the capitalist mode of production.

Bourgeois economists and perhaps most Marxists today assume that the M term in the turnover cycle merely constitutes a technical issue involving a “monetary authority.” As long as the “monetary authority” keeps the “money supply” growing at the rate that is appropriate for expanded reproduction—assuming all the other conditions for expanded reproduction are present—everything should proceed smoothly.

In the series of my posts that deal with money, I explain that this widely accepted view is, in my opinion, incorrect. If the “monetary authority” attempts to create money in the absence of an adequate amount of actually produced money material, the result will be the depreciation of the currency. And if the “monetary authority” persists, soaring inflation and rising interest rates relative to the rate of profit will eventually swallow up the profit of enterprise and destroy the very motive to actually produce surplus value.

This is not simply a matter of theory. Those of us who were alive at the time witnessed just such a process unfold during the 1970s and early 1980s.

The capitalist economy does have mechanisms that tend in the long run to see to it that a sufficient quantity of money material is produced to meet the needs of expanded capitalist reproduction. (11) Mandel himself notes the “counter-cyclical” nature of gold production. But I don’t think he fully grasped that this is precisely the mechanism that the capitalist economy uses to see to it that money material is produced in sufficient quantities to maintain capitalist expanded reproduction over this long run.

But how long is the long run? Is it one 10-year industrial cycle, or is it many industrial cycles? In my posts on the “ideal cycle,” I assumed for purposes of simplification that the period over which the quantity of money material is brought into line with the needs of capitalist expanded reproduction is exactly one 10-year industrial cycle. But is it? Indeed, I noted in footnotes that empirical data does not in fact support this. I will examine this question in posts that will follow this one.

If it could be shown that gold production moves in cycles considerably longer than the 10-year industrial cycles that correspond to “long cycles,” then a material basis for a long cycle would be established. (12) Using the “three cycles” recognized by Schumpeter, the Kitchin cycle involves the accumulation of commodity capital, the 10-year cycle involves the accumulation of fixed capital, while Schumpeter’s “Krondratiev cycle” would involve the accumulation of money capital in the form of money material (gold).

If this hypothesis is correct, and assuming that changes in the level of gold production involve cyclical forces, this would remove the objections of Trotsky and Sweezy that there is no material basis for a long cycle as opposed to the shorter 10-year cycle, and in Sweezy’s case, the “Kitchin” cycle as well.

Cyclical fluctuations in gold production would then provide a mechanism not only for the transition from the long-cycle boom to long-cycle “recession”—though a different one than that proposed by Mandel—but also a mechanism for a transition from the long-cycle “recession” back to a long-cycle boom.

But is gold production cyclical?

Assuming that the level of gold production is indeed the main if not the only factor governing the transition from periods of semi-stagnating capitalism to periods of flourishing capitalism and back again to semi-stagnant capitalism, that is still not sufficient to prove the cyclical character of these transitions. To prove their cyclical character, it would be necessary to show that the swings in gold production were themselves of a mainly cyclical character. But are they?

“But chance discoveries such as the rich bonanzas of California, Australia, the Transvaal,” Mandel wrote in “Long Waves,” “are obviously exogenous factors that cannot be explained … by what occurred during the previous long wave of capitalist development.” That is, the discovery of rich new gold mines in California, Australia, and later the Transvaal—South Africa—was not governed by a cyclical process arising from within the capitalist economy but rather by chance factors arising from without.

Also, the longer the cycle of gold production is, the more likely the level of gold production will be influenced by non-cyclical factors, if only because it allows more time for the action of non-cyclical factors to appear. These non-cyclical factors include the depletion of existing mines, the discovery of new ones, and technological revolutions in the mining and refining of gold.

It is not hard to show that the production of gold and money material in general is only partially determined by cyclical movements of prices and profits.

If the “long waves” are governed primarily by changes in the level of gold production, this would imply they would combine a cyclical element with non-cyclical elements. Such long waves would be expected to be far less regular and predictable—unless you can foresee non-cyclical changes in gold production—than the 10-year industrial cycles or the 40- to 48-month inventory cycles.

Assuming, therefore, that gold production is only partially governed by cyclical forces—which I think is pretty obviously the case—how do the non-cyclical changes in gold production affect the process of capitalist expanded reproduction? Can these non-cyclical changes in gold production throw a monkey wrench into the process that capitalist production uses to see to it that there is sufficient money material available over the long run?

Since Mandel, despite a few hints, did not develop this line of investigation in either his book “Long Waves” or any other work, I cannot say more about this in this post, which must, after all, concentrate on the line of investigation that Mandel did develop. I will return to the role of changes in the level of gold production long waves in future posts.

The biggest problem that Mandel faced in the theory he did present is how a stagnationist long wave is transformed into an expansionary long wave. If the stagnationist waves reflect the long-term downward trend in the rate of profit, why shouldn’t capitalism remain in a gradually deepening semi-stagnant state as the rate of profit declines until it is finally overthrown by the working class?

Mandel gave different reasons for each period of accelerated growth that has occurred since the middle of the 19th century. For the first period, which lasted from 1848 to 1873—sometimes called by historians the “mid-Victorian boom—he did point to the huge expansion of gold production caused by the California and Australian gold discoveries, and the consequent expansion of the world market.

He attributed the 1896-1913 upswing in the “long wave” to the explosion of European, American and Japanese colonization—the enslavement of the peoples of whole continents and the stealing of their natural resources—that occurred during the final decades of 19th century.

Here Mandel seems to be an echoing a view that was popular in the Second International at the end of the 19th century and the opening years of the 20th century. The thriving condition of the world capitalist economy that had replaced the late 19th century “Great Depression” was attributed by such socialist theoreticians as Karl Kautsky to the annexation of agricultural hinterlands by the the imperialist “industrial countries.” (13)

Later, Rosa Luxemburg developed this view in her “Accumulation of Capital” into a theory that held that capitalist expanded reproduction is impossible in a purely capitalist society—consisting only of capitalists and their hangers-on on one side and productive workers on the other—because, according to Luxemburg, it would be impossible to fully realize the produced surplus value. Only the penetration by capitalist production into pre-capitalist countries, Luxemburg claimed, where simple commodity production rather than capitalist relations dominate, allows expanded capitalist reproduction to proceed.

I will examine Rosa Luxemburg views in the last series of posts that will deal with the breakdown theory—that is, the wing of Marxist economic theory that explores the ultimate limits of capitalist production. Mandel, however, did not support Luxemburg’s theory that expanded reproduction is impossible in a purely capitalist society. (14)

Mandel attributed the “expansionary long wave” that followed World War II to the historic defeat of the European working-class movement at the hands of fascism—the victory of Mussolini, Hitler, Franco and the other capitalist dictatorships that arose in Europe after World War I. According to Mandel, this widespread smashing of the workers’ organizations led to a large increase in the rate of surplus value, which temporarily reversed the fall in the rate of profit brought on by the rise in the organic composition of capital.

The consequent rise in the rate of profit set off a new investment boom and technological revolution as inventions that were made during the stagnant years between the two world wars were finally put into production after World War II. The result was the post-World War II expansionary long wave whose end Mandel dates to around 1967.

Mandel who died in 1995—about mid-way through the “Great Moderation”—believed that a long stagnationist wave, which he thought began around 1967, was continuing with no end in sight.

Basing himself on Mandel’s theory, Bill Jefferies has argued that the collapse of the Soviet Union and its allies in Eastern Europe, combined with the opening up of China to renewed capitalist exploitation under Deng Xiaoping and his successors, along with the defeats that the workers suffered in the capitalist countries in the following years, represented a defeat for the world working class comparable to the defeats that the European working class experienced during the fascist era of the 1920s and 1930s.

Could these political developments explain the “Great Moderation” that began around 1983, between the rise to power of Deng Xiaoping in 1978 in China and the election of Mikhail Gorbachev as general secretary of the Central Committee of the Soviet Communist Party in 1985? And since there is yet to be a major recovery of the workers’ movement in any area of the world, is the current economic crisis merely an interruption of a continuing long wave of capitalist expansion somewhat like the crises 1857-58, 1866 and 1907-08 were in their time?

We will have to see the nature of the cyclical upswing that will inevitably follow the current crisis before we will have a definite answer to this question.

Mandel’s final views

Mandel wrote at the conclusion of his 1995 book “Long Waves” that “there will be no ‘soft landing’ from the long depression, only business cycle upturns followed by new recessions, with a steady increase in unemployment and long-term average rates of growth much lower than those of the ‘post-war boom.'”

The rate of growth in most capitalist countries, especially the imperialist countries of North America and Western Europe but also many—but not all—”developing” capitalist countries as well, has indeed been lower during the Great Moderation of 1983-2007 than it was during the postwar boom of the 1950s and especially the 1960s. Official unemployment rates did slowly trend downward during the years of the “Great Moderation” in the imperialist countries in contradiction to Mandel’s prediction that there would be a “steady increase in unemployment,” though they generally remained well above the levels of the postwar boom.

Therefore, is the long wave with an undertone of stagnation that Mandel claims began around 1967 continuing? If so, that long wave has already lasted about 42 years, breaking all records in this regard. Perhaps the “Great Moderation”—which after all was not a “Great Boom” such as those that occurred between 1848 and 1873, 1896 and 1913, and 1945 and 1967-8—represented only a “moderation” within a continuing “long wave with an undertone of stagnation.”

Or perhaps something entirely different is going on that cannot be fit into either a schema of long cycles or semi-cyclical “long waves.”

In the quest for an answer to these questions, so crucial for the fate of modern society, I will, beginning with next week’s post, examine some historical episodes in the history of capitalism that have frequently been explained in terms of either “long cycles” or “long waves.”

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1 The Trotskyist current began as a faction in the Communist (Third) International that supported the views of Leon Trotsky. In 1938, Trotsky’s supporters formed the Fourth International, which the Trotskyists viewed as a replacement for the Third International. The Third International, or Comintern, had, according to the Trotskyists, betrayed the world proletarian revolution under the leadership of Joseph Stalin.

After World War II, the various Trotskyist groups split up into “rival” versions of the Fourth International, often charging one another with “betraying Trotskyism.” Ernest Mandel was the leader of perhaps the largest of these Trotskyists factions, the United Secretariat of the Fourth International. To what extent any of these factions represented or represents a true continuity of Leon Trotsky’s politics, and the relationship of Trotsky’s politics to those of Lenin and other currents within Marxism, is a vast and controversial subject to say the least, which I will not be dealing with in these posts. In these posts, I am interested in Trotsky and Mandel only to the extent that they contributed to Marxist crisis theory.

2 Scientists use sine waves to build mathematical models of cyclical processes.

3 Put another way, the forces that counteract the fall in the rate of profit and transform the law of the falling rate of profit into the law of the tendency of the rate of profit to fall are more or less paralyzed during periods of accelerated economic growth.

4 The classical example of this was the introduction by Ford Motor Company of the assembly line mass production of automobiles, which drastically lowered the price of the automobile, thus creating a mass market for what had previously been a luxury commodity with a very limited market.

5 The longer the “wave with an undertone of stagnation” lasts, the greater the backlog of underutilized inventions waiting to be transformed into actual innovations will tend to be.

6 Paul Mattick claimed that as long as sufficient surplus value is produced to counteract the rise in the organic composition of capital, the realization of surplus value will not be a problem for capitalism. While Mattick deserves credit for emphasizing the production of surplus value, his view that the realization of surplus value is not a problem, as long as sufficient surplus value is produced, in my opinion comes very close, to say the least, to Say’s Law.

7 I have no access to van Gelderen’s article that Mandel refers to. Again, if any reader of these posts can, or knows a person who can, translate van Gelderen’s work into other languages and post it to the Internet or publish it some other form, this would be major contribution not only in recovering our Marxist heritage but advancing it in the 21st century.

8 Mandel attributed this view to G. G. Matyushin in his “Problems of Credit Money,” which was published in Moscow in 1977.

9 I should point out here that while most modern bourgeois economists would strongly deny that the level of gold production has much if any influence on the capitalist economy in this era of “fiat money,” the role of inventories in “short Kitchin cycles” is widely accepted among bourgeois students of the business cycle.

10 The turnover cycle must not be confused with the “business cycle,” even though Marx and many bourgeois economists, including John Maynard Keynes, saw the turnover cycle of fixed capital as constituting the material base of the 10-year industrial cycle.

11 I examined these mechanisms in my posts on the “ideal industrial cycle,” and I will be returning to this subject in future posts.

12 If successive periods considerably longer than 10-year industrial cycles are ruled by cyclical movements of gold production, then the long cycle will have been fully established as a true cycle, notwithstanding the objections of Trotsky and Sweezy.

13 In his famous pamphlet “Imperialism,” Lenin sharply criticized Karl Kautsky for defining imperialism as representing the annexation of agricultural regions by industrial countries. Lenin pointed out that imperialist countries were striving for the domination not only of agricultural countries but of other imperialist countries. This was dramatically confirmed by Roosevelt’s insistence on the unconditional surrender of Germany and Japan during World War II.

In this spirit, the U.S. government did not encourage the bourgeois-imperialist opposition to Hitler within Germany that tried to overthrow Hitler in July 1944. Instead, America refused to settle for anything less than the military occupation of Germany and Japan. Merely stripping them of their colonies was not enough. To this day, the United States maintains significant military forces in Germany and Japan!

14 In contrast to Lenin, Rosa Luxemburg’s theory that capitalist expanded reproduction was impossible in a purely capitalist society centered on the need for capitalist countries to dominate agrarian regions where simple commodity rather than capitalist relationships dominates. Luxemburg’s theory of imperialism, therefore, was by no means identical to Lenin’s, which put the emphasis on the rise of modern corporate capitalist monopolies, though Lenin and Luxemburg were both consistent opponents of imperialism.