We explain how Marx?s theory of the determination of the value of commodities by labour-time leads Marx to predict recurrent crisis, moments of self-defeat, will inevitably occur in capitalism through a tendency for the profit rate to fall in labour-time terms as the economy grows. We then explore how Marx thought in the C19th that at the end of booms surplus capital pushes up speculation in fictitious capital (shares, futures etc). By surplus capital Marx means capital/profit that firms do not want to productively invest due to deteriorating profitability in labour-time terms. The fictitious capital bubble is not an accidental random bubble, but is rooted in the tendential behaviour of the productive economy. The bubble must inevitably burst and crisis result, appearing to be purely a financial crisis. We record how Grossmann repeats Marx?s argument in 1929, predicting a huge crisis for the US. We then model the concept of surplus capital. Our model shows how inflation may distort surface appearances, but does not stop the underlying situation in labour-time terms from manifesting on the surface through the return on investing in fictitious capital rising in booms eventually above the return from productive investment.
|Published - 1 May 2009
|Southampton Solent University Faculty of Business, Sport and Enterprise Research and Enterprise Working Paper Series