Does Capitalist Production Have a Long Cycle? (pt 3)

The mid-Victorian boom

The period from 1848 to 1873 is sometimes called by economic historians the mid-Victorian boom. (1) It saw a huge expansion of industry, world trade and a generally rising price trend. The mid-Victorian boom was not crisis-free, however. (2) A sharp if brief crisis erupted in 1857, and another occurred in 1866.

The economic crash that hit Austria and Germany hard in the spring of 1873 and spread to Wall Street that fall is generally considered to mark the end of the mid-Victorian boom and the beginning of the “Great Depression” of the 19th century. Thereafter, prices trended downwards until bottoming out in 1896.

For supporters of the long-cycle theory, the mid-Victorian boom represented an upswing in the long cycle, or for supporters of Mandel-type long waves, an expansionary long wave. Students of this episode in economic history have the advantage of being able to study the economic commentaries of Marx and Engels themselves, both in published works and private letters.

Especially during the 1850s, Marx and Engels paid extremely close attention to the unfolding economic situation. This was because they believed that the next major cyclical crisis would renew the revolutions of 1848. The revolutions that began in 1848 had been drowned by a huge tide of capitalist economic prosperity that began in the second half of 1848. (3) Let’s see what the revolutionary friends had to say about these events as they unfolded.

“The same symptoms [of developing economic prosperity—SW] have shown themselves in France since 1849,” Marx noted in “Class Struggles in France,” “and particularly since the beginning of 1850.” He continued: “The Parisian industries are abundantly employed and the cotton factories of Rouen and Mulhouse are also doing pretty well, although here, as in England, the high prices of the raw material have exercised a retarding influence.” This improving economic situation was also helping to stabilize the capitalist order in the wake of the 1848 revolutions.

The appearance of an upswing of early as 1849 was something of a surprise, since after the last crisis that had taken place in 1837, depression and mass unemployment with some fluctuations had lingered for five or six years. Why had economic prosperity returned so quickly this time? And was this prosperity for real, or was it simply some short-lived bubble that would soon collapse into renewed crisis?

This question was no mere academic question for Marx and Engels. If the rising tide of capitalist prosperity turned out to be long-lasting, their hopes for any resumption of the revolutionary movement of 1848 would turn out to be without foundation.

Marx and Engels at first assumed that the unexpected prosperity that had thrown a monkey wrench into the European revolution could not last for very long. Certainly the experience of the crisis of 1837 and its aftermath would seem to indicate that the prosperity that was already well underway by 1849 would soon end. (4)

“The development of prosperity in France was,” Marx wrote in “Class Struggles,” “especially promoted by the comprehensive tariff reform in Spain and by the reduction of the duties on various luxury articles in Mexico; the export of French commodities to both markets has considerably increased.” And “The growth of capital in France led to a series of speculations, for which the exploitation of the California gold mines on a large scale served as a pretext.”

Marx mentioned in passing the discovery of gold in California, which like the proverbial cloud no bigger than a man’s hand was casting a shadow on the prospects for an early European revolution. But at first Marx didn’t give much importance to the gold discoveries. Here, the founder of scientific socialism simply saw the gold discoveries as a “pretext for speculation”—the implication being that the new and very rich California gold mines were having only slight and superficial effects on the European economic situation.

Marx, however, did note in “Class Struggles” that the amount of currency in circulation in France had greatly increased: “The most striking proof of restored prosperity is the Bank’s (5) reintroduction of specie payment by the law of August 6, 1850.” (6)

“On March 15, 1848,” Marx continued, “the Bank had been authorized to suspend specie payment.” (7) “Its note circulation, including that of the provincial banks amounted at that time to 373,000,000 francs (14,920,000 pounds). On November 2, 1849, this circulation amounted to 482,000,000 francs, or 19,280,000, an increase of 4,360,000 pounds, and on September 2, 1850, to 496,000,000 francs, or 19,840,000 pounds, an increase of about 5,000,000 pounds,” Marx pointed out.

Very often an increase in currency circulation, especially during revolutionary periods, is a sign of currency depreciation and deepening social, political and economic crisis. But not this time. “This was not accompanied by any depreciation of the notes,” Marx observed—this was indeed crucial—but “on the contrary, the increased circulation of the notes was accompanied by the steadily increasing accumulation of gold and silver in the vaults of the Bank, so that in the summer of 1850 its metallic reserve amounted to about 141,000,000 pounds, an unprecedented sum in France.”

So the increased quantity of bank notes did not reflect a panicky move by the French “monetary authority”—the Bank of France—to increase the quantity of token money in a desperate bid to halt the economic and political crisis—such as was the case with the U.S. Federal Reserve System in the autumn and winter of 2008-09—but on the contrary represented a growth of real (metallic) money.

This growth in money material was stimulating a growth in monetarily effective demand that was causing the demand for labor power by capitalist industry to rise sharply. (8) The previously hungry and radicalized unemployed workers were now finding jobs. The rise in real wages was further encouraged by harvests that were far better than those of the “hungry forties,” causing food prices to fall at the very time the number of jobs was rising rapidly. (9) Economic conditions, in contrast to those of the previous decade, were now working very much against the radicalization of the workers. (10)

“Given this general prosperity,” Marx noted in “Class Struggles,” “wherein the productive forces of bourgeois society are developing as luxuriantly as it is possible for them to do within bourgeois relationships, a real revolution is out of the question.”

He added: “Such a revolution is possible only in periods when both of these factors—the modern forces of production and the bourgeois forms of production come into opposition with each other. The various bickerings in which representatives of the individual factions of the continental party of Order (11) presently engage and compromise each other, far from providing an occasion for revolution, are, on the contrary, possible only because the bases of relationships are momentarily so secure and—what the reactionaries do not know—so bourgeois. (12) On this all the reactionary attempts to hold back bourgeois development will rebound just as much as will all the ethical indignation and all the enraptured proclamations of the democrats. A new revolution is only a consequence of a new crisis. The one, however, is as sure to come as the other.” [Marx’s emphasis]

The question now posed for Marx and Engels was, when would the next economic crisis erupt and what would be its nature? Would it be followed by a prolonged depression like was the case with the crisis of 1837, or would it quickly give way to prosperity like was the case after the crisis of 1847-8? Marx and Engels at that time believed that the timing of the beginning of the working-class socialist revolution in Europe largely depended on this question.

Forced into exile in England by the triumphant reaction, Marx and Engels started what was to be a short-lived newspaper called the Neue Rheinsche Revue, which examined the unfolding political and economic events. Naturally, Marx and Engels scanned the economic skies for signs of an approaching crisis.

Did the revolution of 1848 itself cause a quick return to prosperity?

“While the Continent,” Marx wrote in the January-February 1850 issue of Revue, “has been occupied for the last two years with revolution and counter-revolution, and the inevitable torrent of words which has accompanied these events, industrial England has been busy with quite another commodity: prosperity.”

He continued: “Here, the commercial crisis which broke out in due course in the autumn of 1845 was twice interrupted at the beginning of 1846 by the free trade legislation, and at the beginning of 1848 by the February revolution. Between these two events, a large proportion of the commodities which had been flooding markets abroad gradually found new market outlets, and the February revolution then removed the competition of continental industry in these markets, while English industry did not lose much more from the disruption of the continental market than it would have lost without the revolution from a continuation of the crisis. The February revolution, by temporarily bringing continental industry almost to a standstill, helped the English to weather a crisis year quite tolerably; it contributed substantially to clearing accumulated stocks on the overseas markets and made a new industrial boom possible in the spring of 1849. This boom which, moreover, has extended to a large part of continental industry, has reached such a level in the last three months that the manufacturers claim that they have never known such good time—a claim which is always made on the eve of a crisis. The factories are overwhelmed with orders and are operating at an accelerated rate; they are resorting to every possible means to circumvent the Ten Hours Act and to increase working hours; scores of new factories are being built throughout the industrial districts, and old ones are being extended. Ready money is being loaded onto the market, idle capital is striving to take advantage of this period of general profit; the discount rate is giving rise to speculation and quick investments in manufacturing or in trade in raw materials; almost all articles are rising absolutely in price. …”

Here Marx explained the brevity of the depression that followed the crisis of 1847 as being the result of the revolution of 1848 itself. Marx was suggesting that the revolution so disrupted production on the continent that it freed English industry from the competition of continental industry. Therefore, English industry was able to work off its mountains of overproduced unsold commodities within a year, not the five years it took after 1837.

But with industry now expanding so lustily on the continent as well as in England, wouldn’t a new crisis of overproduction soon erupt? “The manufacturers claim that they have never known such good time—a claim which is always made on the eve of a crisis.” This sounds much like what business leaders around the world were saying in 2006 and 2007! And that is only the most recent example.

As I explained in my description of the “ideal industrial cycle,” business always appears to be going gangbusters on the eve of the crash. But this apparent prosperity—what Marx later called fictitious prosperity—simply covers up industrial overproduction with commercial “over-trading.” That was certainly what was going on in the U.S. housing market in 2006. Nor was the “over-trading” confined to the U.S. housing market by any means. Was the prosperity of 1849 and 1850 an example of a similar phase of “fictitious prosperity”?

“England is enjoying the full bloom of ‘prosperity,'” Marx wrote in Revue in the winter of 1850. “The only question is how long this intoxication will last.” Marx indicated that he believed the prosperity of 1850 was a boom that was headed for an early bust: “Not very long, at any rate. Many of the larger markets—particularly the East Indies—are already almost saturated. Even now exports are being directed less to the really large markets than to the entrepôts of world trade, from where goods can be directed to the more favorable markets. As a result of the colossal productive forces which English industry added in the years 1846, 1847 and particularly 1849 to those which already existed in the period 1843-45, and which it still continues to add to, the remaining markets, particularly in North and South America and Australia, will be likewise saturated; and with the first news of their saturation ‘panic’ will ensue in speculation and in production simultaneously perhaps as early as the end of spring, at the latest in July or August. However, as this crisis will inevitably coincide with great clashes on the Continent, it will bear fruit of a very different type from all preceding crises. Whereas hitherto every crisis has been the signal for further progress, for new victories by the industrial bourgeoisie over the landowners and financial bourgeoisie, this crisis will mark the beginning of the modern English revolution, a revolution in which Cobden will assume the role of Necker.”

Marx was counting on an early crisis, and an early resumption of the revolution. If the huge increase in industrial production that occurred during 1849 and 1850 had represented overproduction only momentary disguised by “over-trading,” a panic worse than any earlier one should soon follow. The revolutionary situation momentary halted by the prosperity would then resume its path toward a victory of the European working class over not only the landowners and the financial capitalists but the industrial capitalists as well.

Indeed, Marx was expecting a “great crash” by the summer of 1850 at the latest. There were some crisis symptoms the following year in 1851, as we I explained several weeks ago in an earlier post. But instead of this signaling the beginning of the great economic crisis that Marx and Engels were expecting, the “crisis” of 1851 soon fizzled out, and prosperity resumed its upward course. But a crisis that was postponed is not the same thing as a crisis that is avoided. There were some fluctuations and false alarms within the prosperity. But finally in the late summer or early fall of 1856, symptoms of a quit different order caught the attention of Frederick Engels.

“The clouds gathering over the money market,” Engels wrote to Marx in September 1856, “are sombre indeed, and the Constitutionnel’s old horizon politique may well come into its own again.” The letter continued: “Last Tuesday’s affair at the Bank, when 1 million in gold was withdrawn, is significant. It almost looks as though the storm is about to break, but this might, of course, he no more than a prelude. In theory, the crash cannot come until Russia is right up to the neck in speculation, but this is hardly to be expected and perhaps it is better so. Another thing which considerably restrains speculators over here is the high price of all raw materials, particularly silk, cotton and wool, where it is far from safe to do anything at all. (13) When the crash comes, however, there’ll be a rude awakening for the English. I should like to know how many of the Continent’s speculative shares have found their way to England—vast numbers, I imagine. This time there’ll be a dies irae [day of wrath] such as has never been seen before; the whole of Europe’s industry in ruins, all markets over-stocked (already nothing more is being shipped to India), all the propertied classes in the soup, complete bankruptcy of the bourgeoisie, war and profligacy to the nth degree. I, too, believe that it will all come to pass in 1857, and when I heard that you were again buying furniture, I promptly declared the thing to be a dead certainty and offered to take bets on it.”

Engels was convinced that the growing tension—increasingly tight money and rising interest rates—on both the English and continental money markets was the first sign of a crisis—far worse than any of the preceding ones—for 1857. This time the symptoms of an approaching crisis were no false alarm. Just as Engels predicted, a world market wide crisis of general overproduction really was on the way for 1857.

Engels even joked that since Marx was buying furniture, a crisis in 1857 was a sure bet. It would be just Marx’s luck that he would buy furniture—a major investment for Marx, who was in continual financial straits in those years—just before he would have to abandon the newly brought furniture to return to Germany to take his place in the in the leadership of the German revolution. As it turned out, Engels and Marx were right about the crisis, but not about the revolution. Marx got to keep his furniture after all. One of the reasons that he got to keep his newly brought furniture was the character of the crisis of 1857 and the depression, or rather lack of one, that followed it.

The crisis arrives

In a letter to Engels dated November 24 1857, Marx noted that the Bank Act of 1844 had just been suspended—allowing the Bank of England to make emergency issues of bank notes independent of its gold reserves:

“The monetary panic in London has subsided to some extent during the past few days but will soon begin afresh with the assistance of, among others, Fould, who has come over here with a French bank director in order to regulate the export of gold from England to France. The actual suspension of the Bank Act could, of course, only be effective in so far as it did away with the panic surplus artificially created by the Bank Act. The banking department should have had to declare itself insolvent the following day since the reserve fund amounted to no more than four or five hundred thousand pounds, whereas deposits public and private exceeded 17 millions. On the other hand this danger was created solely by the Act itself in that the metal reserve in the issuing department was not much below one-third of the issued notes. The Act precipitated the outbreak of the money panic, thereby perhaps reducing its intensity. However, lending by the Bank up to a maximum of 10% (on first-rate papers) will keep a mass of transactions going which must ultimately lead to another crash.”

With the suspension of the Bank Act, which had limited the ability of the Bank of England [the British monetary authority—SW] to issue bank notes to the amount of its metallic reserve, the money crisis was already easing. Marx expected this to be temporary and thought the money panic would soon resume.

In his letter dated December 25, 1857, to Engels, Marx described the effect of the crisis on France. He noted that there had been no “crash” in France, though French industry was gripped by recession as a result of the world crisis. “English, North European and American crises,” Marx noted, “have never directly given rise in France to a ‘French crisis’; rather the effects have been entirely passive—chronic distress, limitation of production, stagnation of trade, and general uneasiness.”

“The reason,” he explained: “France has a favorable balance of trade with the United States, the Hanseatic towns, England, Denmark. With Sweden and Norway the balance is unfavourable, but this is more than offset by Hamburg. Consequently these crises can never generate a drain of bullion from France and hence will not create a properly so-called monetary panic there. If the Bank, notwithstanding, increases the bank rate, as has happened this time, it does so merely to prevent the capitalists from placing their money more advantageously in those countries. But so long as the export of bullion is the inevitable consequence, not of the balance of trade but simply of the avarice of the profitmongers, it can, as Bonaparte has now once more demonstrated, be stopped by the gendarmerie. (14) If the country with the favourable balance of trade has not granted long-term credits or accumulated produce for the export to the centres of the crises—and both are repugnant to the pedlar-like nature of your French manufacturer and merchant—it will have to endure losses, etc., but not an acute crisis. Louis Philippe, too, was misled by the apparent good fortune with which France emerges from the first phase of a general crisis. In his inaugural address before the Chambers on the eve of the February revolution, he congratulated ‘la belle France’ upon this privilege.” [Marx’s emphasis]

There had been no French “crash” immediately after the London crash of 1847 either, but this had not prevented the February Revolution—which overthrew the “bankers’ king” Louis Philippe—replacing the monarch with the second French Republic. But with the outbreak of the revolution, there was no lack of financial panic in France in 1848 as the capitalists became very reluctant to lend, not only because of the economic crisis but because of the revolution itself. What would happen to their loans if a revolutionary government came to power that would annul public and even private debts?

This time Marx expected the spread of the panic to countries where France had a favorable balance of trade to swing the trade balance against France. This would, Marx believed, cause a drain of bullion from the Bank of France that no “exchange controls” could prevent. This would then cause the French money market to crash. All this would further deepen the worldwide crisis leading to a prolonged world economic depression in world trade and industrial production. It would be this depression that would soon unleash a new wave of revolutions that Marx and Engels hoped would lead to a quick victory of the European workers. This time it wouldn’t be just a matter of democratic revolutions but of socialist revolutions.

In a letter to Marx dated January 7, 1858, Engels writing from Manchester indicated that the world’s leading industrial city was indeed feeling the aftereffects of London’s autumn crash: “Luckily the shortage of orders makes it possible for me to leave most of the tasks connected with the year’s end to the office boys, so that I’m not unduly burdened with work. That’s one good job. I enclose today’s Guardian from which you will see that there is still a lot of short time here.”

While English industry in Manchester was clearly in recession, Engels’ use of the phrase “still a lot of short time here” might mean the low point of the recession had already passed, and this only several months after the London panic. But it was still too soon to tell whether a prolonged depression was setting in like after 1837, or whether like in 1848 there would be a quick return to prosperity.

In a letter from London dated February 22, 1858, Marx saw the crisis still deepening, if not in England, then in France and Italy:

“From a paper which recently appeared in the Moniteur it transpires that, if compared with 1855 and ’56, the stored up commodities in the French Customs entrepôts are enormous, while the Economist‘s correspondent declares outright that Bonaparte caused the Bank to make advances on the same and thus enabled their holders to return them. But with the approach of spring they will inevitably be thrown on the market, and then, there is no doubt, there will be a crash in France, answered by crashes in Belgium, Holland, Rhenish Prussia, etc.

“In Italy the economic situation is truly frightful. Side by side with industrial crisis, agricultural distress. (This last, according to the conclusions of an agricultural congress in France, very bad there too. The congress declared that they could not go on with 17 frs. the hectolitre of wheat.)

“Taken all in all, the crisis has been burrowing away like the good old mole it is.”

Prosperity quickly returns

But contrary to Marx’s expectations of a deepening crisis, the crisis soon gave way to a new vigorous upturn. Engels reported in a letter to Marx dated October 7, 1858: “Business here is tremendously good; for the past 6 weeks the spinners have been making 1d à 1 1/4d more per pound on coarse and medium counts than for the past 3 years and—quite unprecedented this—the local market in yarn rose 1d before the Liverpool chaps were able to get another 1/4d for cotton. During the past 10-12 days the rise has slowed down somewhat, but all the spinners are booked up well ahead and demand is still quite strong enough to sustain prices. If it goes on like this much longer there’ll be movements for increased wages. In France, too, the cotton spinners have for sometime been earning more than in recent years (this is positive; I have it from a cotton agent who was over there himself); how things look in other branches of commerce there I can’t say exactly, but the state of the Bourse suggests a considerable improvement. All this looks damned rosy and the devil only knows how long it will last unless there is substantial overproduction with India and China in view.”

In a letter to Engels dated the following day, Marx analyzed the political situation in light of the quick recovery after what had at first looked like a very severe global economic crisis that could lead to years of depression: “Considering the optimistic turn taken by world trade at this moment (although the vast accumulations of money in the banks of London, Paris and New York show that things cannot by any means be all right yet), it is some consolation at least that the revolution has begun in Russia, for I regard the convocation of notables to Petersburg as such a beginning.” (15)

Marx was hoping that the convocation of the “notables in St. Petersburg” would play a role similar to the convocation of the French “estates general” in 1789 that unleashed the French Revolution. But while a revolution was indeed on the way in Russia, it was many decades in the future.

The reality was that the crisis had blown over even faster than the crisis of 1847 had. And unlike the case in 1848, revolutions that restricted production on the continent could not be credited for the rapid recovery in England, since the only restriction of production in continental Europe had been from the effects of the crisis itself.

A new 16th century

In his letter to Engels, Marx indicated the reason why the crisis had passed so quickly without a prolonged world depression like that of 1837-42 that might have actually led to revolutionary developments: “There is no denying that bourgeois society has for the second time experienced its 16th century, a 16th century which, I hope, will sound its death knell just as the first ushered it into the world. The proper task of bourgeois society is the creation of the world market, at least in outline, and of the production based on that market. Since the world is round, the colonization of California and Australia and the opening up of China and Japan would seem to have completed this process.”

The California and Australian gold discoveries had indeed quashed the revolutionary movement of 1848, ending any possibility of a workers’ socialist revolution in Europe in the middle of the 19th century.

Marx on the expansion of gold production as the cause of the growth of the market

Marx in a letter to Engels dated March 6, 1862, returned to the subject of the gold discoveries and the China trade. Discussing the effects of the ongoing American Civil War, Marx wrote that the “Chinese trade, compared with what it was like up to 1852, has certainly increased, but by no means on the same scale as have all other markets since the Californian-Australian discoveries.”

Once again Marx implied that it was expansion of the world market caused by the discovery of gold in California and Australia between 1848 and 1851 that had prevented the crisis of 1857 from developing into a prolonged world depression that might have led to a renewed European revolution.

Engels’ final thoughts

“History has proved us, and all who thought like us, wrong,” Engels wrote in 1895, the year he died. “It has made it clear that the state of economic development on the Continent at that time was not, by a long way, ripe for the removal of capitalist production. …”

Why did Engels looking back at the end of his life come to this conclusion? This was proved, Engels explained, “by the economic revolution which, since 1848, has seized the whole of the Continent, has really caused big industry for the first time to take root in France, Austria, Hungary, Poland and, recently, in Russia, while it has made Germany positively an industrial country of the first rank—all on a capitalist basis, which in the year 1848, therefore, still had great capacity for expansion.”

In other words, the “old” Engels believed that his and Marx’s youthful hopes for a socialist, not just a democratic, revolution in 1848 were doomed by the great possibilities that still existed for capitalism to continue to develop humanity’s forces of production. According to Marx, no mode of production is overthrown before it has fully developed the productive forces that it is adequate for.

This raises a very interesting question. Many Marxists today and indeed over the decades have argued that there is no inherent economic limit to capitalist production. Capitalism will be overthrown because of the growing maturity of the working class and the realization that a better system is possible.

But Engels at the end of his life in 1895 did not seem to share this view. He assumed that a time will come when capitalism will no longer have the ability to develop the productive forces. If, following Engels’ logic, capitalism will continue indefinitely to have the ability to further develop the productive forces, then the prospect of a lasting socialist revolution will be always as illusionary as it was in 1848. Socialism will again be a utopia. (16)

Though in retrospect the notion that capitalism was at the end of the line as early as 1848 now seems quaint, if you put yourself in the position of a person then alive, the idea would not seem so farfetched. There had been the crisis of 1825 followed by the far worse crisis of 1837. Years of depression, mass unemployment, wage cuts, and famine had followed. Then came the new crash of 1847. Surely things could not go on like this much longer. Capitalism must be approaching its ultimate economic limits. Certainly this is what the young Marx and Engels believed.

But just as capitalism appeared to be at the end of its rope, an era of huge economic expansion and prosperity on a capitalist basis set in, only briefly interrupted by the crises of 1857 and 1866. What lay behind this prosperity? Was it an upturn in a “long cycle,” such as Schumpeter and Kondratiev held? Or was it an “accidental” long wave of expansion caused by unique circumstances, such as Ernest Mandel held?

Everything indicates that the prosperity was due to the “accidental,” not cyclical, discovery of gold in California and Australia. The huge increase in the production of money material and consequent expansion of the world market completely transformed the economic prospects of capitalism and shifted the course of world history in the middle of the 19th century onto another track.

But what would have happened if there had been no significant deposits of gold in California or Australia, or anywhere else? Would capitalism have then come to an end in the middle of the 19th century or shortly thereafter? Would schoolchildren be studying in their history books the coming to power of the workers and the consequent transformation of capitalism into socialism during the 19th century?

Lets jump ahead 100 years to the mid and late 1940s of the 20th century. The combination of two world wars within a generation, an unprecedented global depression, and the barbarism of European fascism all seemed to indicate that capitalism was at end of its rope. But then a huge economic expansion of capitalism set in that was to derail the hopes of another revolutionary generation. In next week’s post, I will begin the examination of this episode. Can it be explained by a Kondratiev-Schumpeter long cycle, or a Mandel-type semi-cycle?


1 Victorian refers to the British Queen Victoria, who reigned from 1837 to 1901. The long period of economic prosperity under examination in this post occurred during the middle of the British monarch’s reign.

2 The 1848-1873 period of prosperity was not really a boom, since technically a boom refers to a particular phase of the more or less 10-year industrial cycle. What is really meant is that the industrial cycles that occurred between 1848 and 1873 were dominated by the boom phase of the cycle. During this period, there were no prolonged economic depressions. In contrast, the industrial cycles that occurred between 1873-1896 were depression-dominated. This is why this period became known—before the Great Depression of the 1930s—as the “Great Depression.”

3 Exactly a century later, something similar happened in Europe once again. In the wake of the Depression, fascism and World War II, Europe seemed ripe for a socialist transformation. But starting in the late 1940s, a prolonged upward economic movement set in that progressively undercut the revolutionary moods in the western half of the continent while undermining the socialist governments that had been created in the eastern half of the continent. In coming posts, I will examine what was behind the prolonged capitalist economic upswing that set in right after World War II.

4 Again we can see a striking parallel with the events that took place a century later. The Marxist generation that lived through the crisis that began in 1929 and its aftermath assumed that another period of prolonged capitalist prosperity was simply impossible. When prosperity set in anyway, at first it was assumed that it would be short-lived and that a new “1929” was imminent. The founders of Marxism had reacted the same way a century earlier.

5 This refers to the Bank of France, France’s central bank, or “monetary authority.”

6 The notes of the Bank of France were once again made payable in gold and silver coin. The bank notes were again true credit money, not token money. Unlike the huge expansion of token money by the U.S. Federal Reserve System during the panic of last autumn and winter, the Bank of France was issuing credit money convertible into gold and silver coins on demand, which represented a real growth of metallic money in the country, not token money.

7 Under the pressure of the February Revolution and the aftermath of the 1847 London panic, the Bank of France had been forced to suspend the redemption of its notes into gold and silver coin. In effect, it was forced to issue token rather than credit money to deal with the financial effects of the revolution, which were worsened further by the pre-existing economic crisis. The revolutionary and economic crises were feeding on one another.

The ability of the Bank of France to resume specie payments in August 1850 indicated how much the situation had reversed. The end of the economic crisis also meant the ebbing of the revolutionary crisis and the all-round stabilization of the capitalist order.

8 In this period, Marx did not yet distinguish between labor and labor power, a distinction he only began to make around 1857.

9 Though most commodity prices were beginning to rise due to the effects of both the prosperity and the devaluation of gold due to the discoveries of new rich gold mines in California and then Australia, food prices in contrast were falling due the a series of favorable harvests. The fall in food prices, tended to raise real wages, increasing the purchasing power of the working class and reinforcing capitalist prosperity.

10 This was reflected not only in the defeat of the revolutions on the continent of Europe by 1849 but also in the dying out of the Chartist movement in Britain after 1848.

11 A reference to the triumph of the political factions representing the interests of big landowners and capitalists who upheld the existing “order” that dominated Europe in the wake of the 1848 revolutions.

12 By “reactionaries,” Marx meant the upholders of feudal as opposed to capitalist relations. Marx is pointing out that the rapid development of capitalism then underway was not only working against prospects for a workers’ revolution in the immediate future, but was also undermining what was left of feudal relations in Europe as well.

13 High raw material prices are frequently an indication of an approaching crisis.

14 A reference to exchange or capital controls that capitalist governments sometimes impose in times of crisis. The government uses the state power in an attempt to prevent the withdrawal of money capital from the country, thus attempting to prevent a full-scale “crash” and a subsequent massive contraction in monetarily effective demand, collapsing production, and massive unemployment.

15 The accumulation of huge hoards of idle money capital in the banks is characteristic of the depression phase of the industrial cycle. Marx was implying that the world economy must be in some kind of depression. However, Engels in Manchester was reporting that business was “damned rosy.” This implied that even with the accumulation of huge hoards of idle money capital in the banks, business was booming. Since these hoards of idle money capital were not token money created by the “monetary authorities” but “real” gold money flowing into Europe from the gold mines of California and Australia, the implication was that monetarily effective demand would be expanding for years to come making the kind of prolonged world depression leading to the radicalization of the workers quite unlikely for some time.

16 The theory of historical materialism holds that no mode of production disappears from the scene until it has fully developed the productive forces that it is adequate for. For example, if the mode of production based on ancient slavery had been capable of developing the forces of production to the levels that prevail today, the Roman Empire armed with modern technology would have lasted until today. Indeed, science fiction stories picturing such a “modernized” Roman Empire have been written.

Historian Richard Carrier holds that the economic crises—the debasement of the Roman currency—and political crises—the civil wars fought by rival candidates for the imperial throne—that led to Rome’s fall “would have been averted by successfully enacting an effective constitutional government ensuring the peaceful succession of power.” [] Ken Humphreys, the Internet atheist [], in contrast, blames the victory of the Christian church for the destruction of Roman civilization.

The historical materialism of Marx and Engels rejects these kinds of explanations for the fall of classical civilization. It holds that the collapse of Roman civilization did not hinge on such accidental causes as the nature of the Roman constitution or the successes of the early Christians in building up the power of their church. Instead, Rome inevitably declined and fell because its dominant mode of production based on slavery had reached the limit in its ability to develop the forces of production.

Since this mode of production had not developed a revolutionary class capable of transforming the mode of production that dominated the Roman Empire into a new more productive mode of production, Rome and it’s civilization were doomed. Neither currency or constitutional reforms—which were indeed attempted by various Roman governments—or a successful struggle against the rising Christian church—also attempted by Roman rulers—could have saved it. The class struggle of the ancient world therefore ended in the mutual ruin of the contending classes.


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