short essay questions

Chapter 1

Prosperity

Once methods of capitalist production come to dominate a single, given society, its development always proceeds through the so-called business cycle, which must repeatedly go through three phases: prosperity, crisis, and recession. Crisis is one of the phases of this cycle, appearing necessarily within the process. Indeed, what must be clarified above all is this necessity itself. However, if any light is to be shed on the repetition of these three phases, we must first clarify which phase begins our analysis. The cause of crisis is found in the accumulation of capital during the period of prosperity; accumulation during the period prosperity is based on the reorganization (seiri) [of the composition of capital] during the period of recession; and the reorganization during recession, it can be said, stems from the destruction of capital in the wake of crisis. Every phase, therefore, is nothing less than the result of the previous phase. As I will have opportunity to describe and explain in more detail later, and as I already have touched upon in the Introduction, these three phases do not merely repeat the same, identical process. Composed of these three phases, each cycle reveals a period of prosperity that is comparatively more developed than the previous cycle, but it also reveals a period of recession that falls beneath the previous cycle’s period of prosperity, thereby taking on a zig-zag (jigu-zagu) like path by capitalism’s ever expanding process of development. As a whole, this is nothing but a stage in the advance of capital’s accumulation.

Properly speaking, the accumulation of capital has two planes (men), one that does not accompany changes to the composition of capital, and that therefore increases the amount of capital quantitatively with the same composition; and another plane of accumulation, in which a rise in the amount of capital brings about changes in the composition of capital. While the former increases the number of workers in tandem with the accumulation of capital, the same cannot be said for the latter, necessarily. In any case, while this represents nothing less than the advance of capital’s productive powers, as well as the progressive enlargement of capitalist production and the advance of its continued accumulation, it goes without saying that the former is the simpler and more fundamental of the two. And while it cannot be said that the two dimensions appear immediately, as such, within the accumulation process, and in each phase of the business cycle, it can be said generally that the former is represented by periods of prosperity, while the latter by periods of recession. Crisis, then, is a link (ikkan) in a cycle that binds together (ketsugō)—or that rather converts (tankan)— one plane of accumulation with, and into, the other plane of accumulation. The positive advance of capitalist accumulation is accumulation during the period of prosperity. Accumulation during the period of recession is its negative advance. Put differently, on the surface of things, it appears that during the period of prosperity, accumulation proceeds without changing the composition of capital. But beneath this surface appearance is something that already connotes a generally higher composition of capital compared to that of the last cycle, which increases the absolute number of workers, which advances capitalist accumulation itself, and which necessarily brings about crisis. The meaning of the period of recession is found here, for it organizes the advance—as well as the “excess” of—accumulation that accompanies a single cycle, and prepares for the next cyclical process. Thus, the cyclical process must begin with the period of prosperity.

1. The Accumulation of Capital in the Period of Prosperity

For the accumulation of individual capitals, it goes without saying that it comes from the profits realized by the sale of commodity products. First, money obtained from the sale of these commodity products recovers expenditures spent on raw materials and other circulating and constant capital, as well as on variable capital, as wages, and allows for a new round of purchasing raw materials and employing workers. Second, money is accumulated as a portion for the amortization for the portion of fixed capital; and finally, third, a portion of the profits are divided into the capitalist’s personal consumption funds and into accumulation funds.[footnoteRef:1] Socially, the many and various individual capital’s commodity products are exchanged through the mediation of money, continuing the reproduction process of these capitals, and supplying the necessary means of production and means of consumption (shōhi shiryō). As a commodity economy, this is of course self-evident, but it is not something that is planned. It is always, unavoidably, in a state of excess or deficiency (kabusoku). It is safe to say, however, that this excess and deficiency is something that can be adjusted in accordance with changes in the price of commodity products. Here, however, two points of caution need to be made. The first point is that, when it comes to individual capitals, the funds (shikin) needed for the amoritization of fixed capital must have been previously accumulated in the form of funds (shikin no keitai), and for a period of time that is more or less definite, which means that these funds can neither be invested in fixed capital immediately, nor be used immediately for the enlargement (kakuchō) of actual capitals. As I will discuss later, this is where the function of credit plays a crucial role for the accumulation of capital in the period of prosperity, but as for the accumulation of funds for individual capitals, there must always be kept an accumulation of funds for physical repairs of fixed capital and for the expansion (kakudai) of production. As a result of these accumulated funds, the function of credit acquires a new dimension of activity. The accumulation of capital, of course, is never simply a matter of obtaining and then hoarding (chikuzō) larger amounts of money. The accumulation of capital is nothing other than the process by which, in accordance with the annual product, more and more capital is produced, and more and more surplus value is realized and then transformed into capital on the basis of surplus labor. The annual product, as means of production and as articles of consumption, realizes (jitsugen) the reproduction and accumulation of capital. Thus, for example, if, on the one hand, the funds for the amortization of the portion of fixed capital is realized in money and accumulated, in this form, for a definite period; then on the other hand, for the capital whose fixed capital has already been replaced, these funds must be used for future, concrete replacements of fixed capital. Socially speaking, the renewal of fixed capital becomes possible for the first time in this way, irrespective of individual capitals. For example, with the products of individual capitals, even if they are consumed annually as articles of consumption, unless the amoritzation funds on their fixed capital are made available and produced, in a socially corresponding way, by other capitals allotted for the renewal of various fixed capitals, then it is likely that this capital will not be able to replace fixed capital during periods of renewal. Simply saying that the annual product creates articles of consumption does not mean that, social speaking, the replacement of fixed capital can take place if its amoritization funds are consumed to the point of their value portion. If this portion of value can be bought and sold as commodities, this is because it makes possible the replacement of fixed capital, which depends on the exchange of products with other industrial sectors. This is to say that, if it is possible for one portion of capital to be accumulated as money and not be used for the replacement of fixed capital, this is because another corresponding portion of capital is already replacing it. This point is clarified by Marx in Capital, volume 2, Part 3, “The Reproduction and Circulation of the Total Social Capital”, in the so-called reproduction schemes. In actuality—and differing from the assumptions of the reproduction schemes— the annual reproduction is not something whose settlement is limited to one year, nor is it something in which the accumulation of amortization funds guarantees replacements. Nevertheless, such relations must be recognized as basic social relations, and actual relations will not be understood unless these basic relations are clarified. [1: [Transl. note:] On amortization funds, Marx writes, “Even though…a large part of the money that flows back to replace the wear and tear of the fixed capital is transformed back into its natural form annually, or even more frequently, each individual capitalist still needs an amoritization fund for the part of the fixed capital that reaches its term of reproduction only after a period of years, and then has to be replaced entirely.” Capital, Vol. 2, 260, Penguin edition]]

Regarding accumulation funds, basically the same relation can be assumed. On the one hand, the funds that are accumulated as money on the basis of individual capitals are invested into the actual expansion of production, again as money accumulated on the basis of individual capitals, on the other. Within the portion of surplus value, that which has been accumulated out of the annual product must be allotted, socially speaking, for the expansion of production. In this way, accumulation—as an accumulation of money—is always possible, even if it is found beneath a certain mass of circulating money. This money, exchanged as accumulated funds, passes from the hands of one capitalist to another, thereby contributing towards the transformation of one part of the social surplus product into the expansion of production. However, even if it can be said that capital expands production with one portion of the annual surplus product, this portion represents nothing other than the means of production and the workers’ means of subsistence (seikatsu shiryō), understood as articles of consumption (shōhi shiryō). It is here, then, that we need to raise the second problem.

Even if capital can convert one portion of surplus value into capital and realize production on an ever larger scale, it is nonetheless incapable of producing, on its own, the workers who constitute the foundation of production. Capitalism, whose foundation is established with the commodification of labor power, was able to realize the commodification of labor power during its formative period (hassei-ki) through the so-called process of the primitive accumulation of capital, when small producers, especially peasants, originally tied directly to means of production, were separated from these means of production. Then, especially with capitalism’s period of consolidation (kakuritsu-ki), the commodification of labor power was secured through the formation of a relative surplus population, as an industrial reserve army, which stemmed from the growth of the organic composition of capital, thereby showing that the conversion of surplus product into capital was not the simple result of a natural increase in the laboring population. The laboring population is not something that naturally increases with the accumulation of capital. The accumulation of capital basically cannot take place without the growth of the organic composition of capital. Or, to put matters differently, generally speaking the accumulation of capital is not simply a matter of distinguishing between phases prosperity, crisis and recession. Rather, as a process of the total development of capitalism, the accumulation of capital both accompanies the growth of the organic composition of capital, and allows for the quantitative expansion of capital. In reality, however, the tendency in capitalism of a rise in the organic composition of capital does not take place incessantly. Moreover, in actuality, the replacement of fixed capital of individual capitals does not occur simply when amortization funds are accumulated as money and then invested in the concrete means of production when the period of renewal of other capitals are reached; it is not as simple as this.

To speak at all of an advance in the accumulation of capital during the period of prosperity implies, first of all, a starting point in the phase of recession, which presupposes lowered and prices and the pre-existence of a surplus population, and which provides the foundations for the rise of the organic composition of capital that is made possible by improvements in productive methods. What is revealed here is how the renewal of fixed capital cannot take place, with the capital already invested, until a definite period of time has passed. At the same time, in the period of prosperity, the advance of the accumulation of capital takes place on the basis of this general renewal of fixed capital, but this does not mean that, in the period of recession, pressures from lowered prices make improvements to productive methods inevitable. Even if it can be said that capital always pursues its particular goal of profit through improvements to production methods, the drive (dōryoku] for improvements in production methods differs according to periods of prosperity and periods of recession. Even if we were to suppose that the immediate goal of capital was to make improvements to production methods by shortening the working day of productive workers as a result of advances in productivity, even with the adoption of this kind of socialistic method, the form of capital, whose goal is profit, would not only prevent the improvement of the fixed facilities (as means of labour) from taking place constantly; it would also never make improvements with this immediate purpose in mind. In periods of recession, when the acquisition of profits is difficult, an enormous amount of energy is required to improve production methods, and because of competition within the same industry, the renewal of fixed capital ultimately cannot but take place by adopting new methods as quickly as possible. By contrast, during periods of prosperity, the fact that the acquisition of profits is assured itself dulls the drive for improvements in production methods. Moreover, in considering the fixed capital portions of individual capitals that have already been renewed, even when, for example, new production methods are discovered or invented at certain, definite periods, this hardly means that the original capital can be replaced immediately with these new discoveries or inventions. No matter the degree to which an additional expansion of production methods is able to make improvements, it cannot avoid its own natural restrictions. So long as the new methods do not go so far as to completely scrap the former methods and cause a decline in prices, fixed capital—whose renewal and investment takes as its starting point the period of prosperity—will advance towards renewal in the wake of the destructive drop in prices accompanying the shift from crisis to the period of recession, but until that time comes, former production methods will remain unaltered. Moreover, in reality, the actual implementation of improved production methods does not take place immediately simply because new production methods are discovered or invented. The fall in prices during periods of recession is the crucial trigger for this implementation.

Of course, in considering the starting point of periods of prosperity, the new cycle of accumulation does not begin with improvements carried out uniformly on the production methods of various capitals, and in various sectors. No matter where the prices fall in a period of recession, when improvements to production methods are carried out in a given sector, competition will lead inextricably to the replacement of fixed capital within that sector. (Here, we can ignore, to a certain extent, whether the period of renewal actually comes or not.)[footnoteRef:2] In other words, the tendency of renewing fixed capital in a concentrated manner during this period originates here, the starting point of which overlaps generally with the period of prosperity. By the same token, it is here that the production of the means of production, which was forced during the period of recession to undergo drastic contraction, returns to life. The reason is that improvements to production methods, in spite of a decline in prices, nonetheless can recover profits to a certain degree. Through newfound productivity, the period of prosperity develops in such a way that capital is able to generally reduce the value of labor power and secure the basis of reproduction under new relations of production. Even when improvements to production fail to take place in other industrial sectors, the influence of these new relations of production is felt. [2: [Transl. note: For Uno, the problem of the “renewal time” of fixed capital, or kotei shihon no saishinki, as well as its exclusion from the analysis in the fundamental principles, points to the methodological question of his dankairon, or his analysis of the stages of capitalism. This problem becomes particularly meaningful in the stage of imperialism, during which periods of the renewal or replacement of fixed capital tend to be drawn out over time in so-called “chronic recessions”. Especially in periods of recession in the stage of imperialism, and in the sector of the heavy industries specifically, with the rise in capital’s organic composition, the massive concentration of fixed capital (e.g., iron-works factories) becomes a material and time-bound burden on capital in periods of recession, when it is difficult, if not impossible, to sell-off the fixed capital. Thus, the sell-off time also needs to emphasized here as a temporal determination of the renewal of fixed capital. (David Harvey has also emphasized this point with his notions of “spatial fix”.) This should not distract us from the basic point that Uno is making here, however, which is that, for a theory of crisis, the inevitable temporal and spatial restrictions of fixed capital, which are limited by the form of capital—which is itself bound to the necessity to commodify labour power— and the temporal presence or absence of amortization funds needed to carry out the replacement of fixed capital (which connects to the temporal restrictions of the credit system), are all crucial problems of capital’s uneven temporalities that pertain fundamentally to the exposition of the necessity of crisis in Uno’s text. ]

In the period of prosperity, capital’s expansion of the scale of production doesn’t simply come from the conversion of profit into capital. The conversion of profit into capital not only requires the accumulation of a definite amount of capital, but, depending on the conditions of production, it is also possible that the scale of production will not be able to be expanded immediately. Thus, if there is an accumulation of funds that cannot be invested directly or immediately into production, but that are still as yet insufficient as a fund for accumulation, then in the meantime these funds will have to be given some elasticity (yūtsū). Insofar as they allow for an acceleration of the production and sale of commodities, the elasticity of these funds performs an extremely important role in the recovery of the reproduction process in the period of prosperity. That the renewal of fixed capital tends to be concentrated at a definite period of time means that its amortization funds are added to other funds, thereby increasing various powers of flexibility. This is a problem of credit, and so, for our consideration of accumulation in the period of prosperity, it is unthinkable to ignore the important role that credit plays in the expansion of capitalist society’s scale of reproduction.

2. The role performed by credit

Generally speaking, the movement of industrial capital proceeds through three stages (dankai), which can be separated by ellipses: M (money invested as capital)—C (means of production and labor power as commodities)….P (production)….C’ (commodities endowed with new and more value)—M’ (money with more value). The movement of M—C, P, C’—M’ represents a process of buying, production, and selling that requires a given amount of time. However, for capital to maintain production in an uninterrupted way—and the existence of fixed capital especially requires this—the entirety of capital cannot be invested in the production process. Put differently, the total capital is allocated to each stage of the process in definite proportions, so that when one part is allocated to the segment of M—C, another part goes to the production process; when the capital in the production process, as C’, is allotted to the process of C’—M’, the capital found in the process of M—C is allotted to production. The production of surplus value, which is the goal of the movement of capital, can only be achieved, however, in the production process, which represents one stage of the various movements. The circulation processes of M—C and C’—M’ represent nothing more than an incessant and continuous processes (yamu wo enai katei). Marx’s so-called circulation capital is found in this process, and whether it exists in the form of money or in the form of commodities, it exists, as far as capital is concerned, in an idle state.[footnoteRef:3] Capital tries as much as it can, however, to minimize this amount so that more productive capital can be allotted to the production of surplus value. So, for example, if, in the case in which a cotton spinning manufacturer is unable to turn his cotton thread (as a manufactured good) into cash through an immediate sale, this sale can be made against a three month bill of credit, and when this credit allows him to purchase raw cotton as his raw material, it goes without saying that, for the textile manufacturer who has purchased cotton thread on credit, as well as for the cotton spinning manufacturer who has purchased raw cotton on credit, the circulation capital that allows for the continued production for both parties is made possible, to a certain degree, by the limitations set by the funds of the raw cotton cultivator. In any case, it is through credit that the textile manufacturer, as well as the cotton spinning manufacturer, are able to immediately transform the required circulation capital into productive capital whenever their funds cannot be made flexible. In other words, by harnessing a definite quantity of social capital, credit actually expands the production process. This doesn’t occur, of course, when a fall in prices makes it impossible to expect adequate profits, but rather when there is a turn towards a period of prosperity, when the acquisition of higher profits stemming from a recovery of prices is anticipated, when relations of credit are mutually extended between every industrial sector for the sale and purchase of their products, and when the production process is expanded as much as possible. So long as mutual payments are secured, it is unthinkable that an individual capital would not take advantage of these various credit opportunities. Certainly, while all of the relations between industrial sectors cannot be said to be tied by these credit relations, and while there may there may also be increases on payments to workers that cannot make use of credit, nonetheless, it cannot be denied that credit, as something that mediates between capitals, plays an important role in the expansion of production. It thus goes without saying that the enlargement [kakudai] of credit uses, in addition to the original forms of circulation capital as money and commodities, preparatory funds reserved for changes in price, as well as amortization funds for fixed capital and accumulation funds, which we have discussed earlier. As for the amortization funds or accumulation funds, it presupposes, as a basic relationship, how an accumulation of money (kahei) corresponds to the renewal of fixed capital and accumulation, and how this relationship is used for the expansion of various facets of production. Put differently, for a specific, given industry, instead of saying that means of production or articles of consumption are useful for the renewal and accumulation of fixed capital, we should rather say that the means of production and articles of consumption that are in demand are produced when industry expands production by taking advantage of movements in prices. Of course, in reality, the elasticity itself of these funds (shikin no yūtsū jishin) is one in which it goes from increasing the demand for means of production and articles of consumption, to accelerating that production, to then increasing supply to meet the increase in demand stemming from prices changes. [3: Marx’s so-called circulation capital (ryūtsû shihon) should not be confused with the circulating or fluid capital that is opposed to fixed capital. The distinction between fixed and circulating capital pertains to the capital in the production process, whose value is recovered, with each repetition of the production process, whether partially, as with machinery and other means of labor, or entirely, as with raw materials and labor power. (Here, the value of labor power is not simply recovered each time; it is merely recovered from the value newly produced by labor. Perceived from the turn-over of capital, however, labor power can nonetheless be considered, along with the constant circulating capital (fuhen ryūdō shihon) of raw materials, etc. as circulation capital.) By contrast, circulation capital is distinguished from the productive capital within the production process, and exists, as Marx points out, in the form of commodities or money. It goes without saying that, in tandem with the movement of capital, circulation capital then converts into productive capital. ]

Here, however, we when think of so-called commercial credit, its meaning is obscured by the fact that it is buried in a process stemming from the operations that specialize in the sale and purchase of commodities: the work of merchant capital, which exists in a relation of exteriority to capitalist relations of production, and the work of capitalist commercial capital. In any case, as the foregoing has shown, the original basis of commercial credit stems from how industrial capital itself is able to expand the scale of production by mutually using this commercial credit. If these matters are not given this kind of exposition, its social meaning will never be clarified. Then, it will be impossible to analyze the functions of commercial capital, let alone merchant capital. In fact, commercial capital stands in for the commercial credit of industrial capital, and functions as that which strengthens and enhances the latter.

Now, once the elasticity of the funds of various idle capitals, which exist between industrial capitals, passes through the independent institution of banks, the credit relations between individual capitals develop into a credit relation between banks and industrial capital, that is, into so-called bank capital. In addition to bundling up, in a concentrated way, the various idle capitals of individual industrial capitals, banks socialize the credit relations of individual industrial capitals. For example, it is not necessary for an industrial capitalist, who has sold on credit, to make payments with the trade-bills that he has already accepted, for he can have his trade-bills discounted at the bank and immediately obtain the cash that he needs. On the one hand, banks are entrusted to concentrate the idle funds of industrial capitalists; on the other, they lend, at an interest, those funds to the industries that socially demand the expansion of those funds, and that anticipate payments stemming from the movement of prices of products from industry. In the interim period, and with the so-called profit motive generated by the difference in interest between the deposit and the loan, profits are made on bank capital invested by the bank’s accounting department. The bank thus mediates the industrial capitalists’ idle funds and generally becomes the institution that socially expands capital’s reproduction process, and no longer functions as a form of loan capital that treats one’s own funds as interest-bearing usury capital.[footnoteRef:4] By passing through both the deposit and the loan, these funds are commodified and earn interest at a definite price (daika). The bank thus becomes a merchant, buying up funds cheaply and selling them dearly. Interest can thus be said to bring out the value of these funds as commodities, as opposed to their use value as capital, which is used over a definite period of time, that is, during the time these funds are recovered (kaishū) over a definite period of time that itself has a use value. At the same time, in cases when these funds cannot be used as capital, they can become bought and sold as commodities at a definite price (daika). [4: In reality, the funds that are collected in banks are not simply the idle funds of industrial capital. Moreover, the interest on these funds is not limited, as I have discussed above, to the commercial credit required for the reproduction process of industrial capital. This is a distinction that is in fact decided upon by the actual operations of the bank, but here we are not prescribing the bank’s role strictly in accordance to its existence as a concrete financial institution. Rather, by focusing on one of the bank’s basic dimensions, we are trying to clarify how, in a capitalist society generally, the role of credit factors into business fluctuations (keiki hendō no yōin). For a so-called theory of finance (kinyūron), the distinctions and forms accompanying the bank’s concrete developmental process, as a financial institution, must certainly be clarified, but for the theory of the fundamental principles, the basic norm of banks actually cannot be grasped if these concrete functions are considered in and of themselves. Similar to other cases, here we are considering, in a purely capitalist society, the role of credit as it accommodates funds between industrial capitals. Therefore, it is safe to think that the lending of funds, as so-called circulation credit (ryūtsû shinyō), is limited to the accommodation of funds required for the sale and purchase of commodities. The essential quality of credit, however, cannot be properly clarified by an explanation that claims that circulation credit is merely the lending of money, and not the lending of capital. That which is lent is neither merely money, nor capital, but funds (shikin). Generally speaking, these funds are lent as money that has been liberated, as it were, from the function of the means of circulation, as so-called currency, that is required for the sale and purchase of commodities, but they function as capital that is constantly used as a means of circulation by borrowers. Moreover, as I have described earlier, it also goes without saying that we cannot consider the process of making merchant or commercial capital’s funds available directly (in the fundamental principles). More concretely speaking, as for the prosperity-phase in the accumulation process, while it can be said that an important role is often played by the making available of funds that fall outside of the idle funds of industrial capital, a consideration of these factors cannot be made here, for it would not only complicate our analysis unnecessarily, it would also ignore their basic determinations. ]

In this way, industrial capital— in addition to depositing its idle funds in banks as often as it can while simultaneously using the funds that are concentrated by the banks as the needs arises— socially uses the funds that cannot be used directly by individual industrial capitals, and is nothing less than a process by which the scale of production is expanded, capitalistically and socially, to the greatest extent possible. Through the use of credit, industrial capital forms increasingly larger funds and supplies them to banks, which serve as a market for funds, while also using them as much as they can; at the same time, the supply and demand of funds pass through changes in the interest rate, and comes to adjust the funds allocated by the reproduction process. Ultimately, this is based on, and restricted by, the rate of profit, but this does not necessarily mean that a low interest rates mean low profit rates, or that a high interest rates mean high profit rates. Quite the contrary, often there are cases in which interest rates rise when profit rates fall, as well as times when a fall in interest rates can be seen when profit rates sharply rise. It is precisely here that the capitalistic, social function of loan capital is exhibited.

On the basis of a fall in general prices and a fall in wages that is born alongside a fall in profits in the period of recession, capital is able to anticipate a revitalization of industrial activity once an even partial recovery of the profit rate— itself generated by newly improved methods of production— is seen. However, this decidedly does not mean that a recovery of the profit rate for all capitals is immediately presented. As I have pointed out earlier, while there is a tendency for the general replacement of fixed capital to take place, by and large, in a concentrated way and at a definite period of time, the fact that production methods can take place with one part of capital does not mean that another capital can be immediately used towards the same improvements. For the majority of capital, improvements to methods of production result from, and are compelled by, competition, and are determined by the extent to which the continued use of fixed capital regulates older production methods. But for various industrial sectors, and especially for individual capitals, while this fact leads to the appearance of uneven development, it also, by the same token, hinders this development. Similarly, regarding funds, while its formation is hindered at certain, definite periods of time, there is a concurrent tendency towards the partial growth (zōka) in the demand for these funds, which is often the reason why, within a situation in which a general recovery in the profit rate cannot be seen, a rise in interest rates takes place. However, within industrial sectors in which improvements in production methods have taken place, the basis for the recovery of the profit rate is provided once the replacement of fixed capital is generally completed, and as the adoption of these improvements gradually becomes generalized after passing through competition. the basis for the recovery of the profit rate is provided. Conversely, a fall in the interest rate can be seen at the same time.[footnoteRef:5] [5: In “Archetypical cycles and alternating cycles of business alternations” [景気交替の典型的循環及び交替段階], Arthur Spiethoff (1873-1957) provides the following chart: Recession Fall (fall in capital investments, the consumption and production of iron, and interest on loans) First stage of upswing (jôshô) (cessation of the slow-down of iron production, consumption, and capital investments (shihon tôka), and the beginnings of a feeble movement of recovery) Prosperity Second stage of upswing (energetic growth of capital investments, especially in stocks. Iron consumption nears the peak of the previous 最高況) 最高況 (rise in interest on loans (kashitsuke rishi), surmounting of the peak of the previous 最高況) Shortage of Capital (kapital mangel) (difficulties in raising capital, that is, a slow-down in investment capital, a sudden rise in interest on loans, stagnation of market rate of stocks, decrease in housing construction, stagnation of iron consumption) Crisis (destruction of credit, frequency of failures on payments) Spiethoff’s research is not only based on England but primarily on Germany, especially after the 1840s, but it suffers from several points, notably a total failure to consider the distinctions between different stages of capitalist development before and after the 1870s, as well as a failure to critically examine basic concepts—such as capital—that have already been elucidated in Capital. But while his research distinctly lacks overall clarity, I would generally accept his foregoing description— as phenomena accompanying the three stages of recession, prosperity, and crisis—of the fall (karaku), the first upswing, the second upswing, the highest point, and a shortage of capital. In my analysis here, Spiethoff’s so-called second upswing overlaps with the transitional period from recession to prosperity, in which a recovery of profit rates accompanies low interest rates. Let us now take a look at Spiethoff’s comparison between the alternations of periods of prosperity and recession, on the one hand, and fluctuations in the interest rate, on the other. (Here, the interest rate is taken as the lowest average discount rate of interest of the Anglo-Dutch bank.) Pound Shilling Pence Prosperity 1844 2 1o 0 1845 highest point 2 13 8 1846 “ 3 6 6 1847 capital shortage 5 3 6 Recession 1848 Fall 3 14 5 1849 “ 2 18 7 1850 First phase of rise 2 10 1 1851 “ 3 0 0 Prosperity 1852 Second phase of rise 2 3 0 1853 “ 3 3 10 1854 High point 5 2 3 1855 “ 4 17 10 1856 “ 6 1 2 1857 Capital shortage/crisis 6 13 3 Recession 1858 Fall 3 4 7 1859 “ 2 14 7 1860 “ 4 3 7 1861 First phase of rise 5 5 4 Prosperity 1862 Second phase of rise 2 10 7 1863 High point 4 8 2 1864 “ 7 8 0 1865 “ 4 15 4 1866 Shortage of capital 6 19 0 Recession 1867 Drop 2 10 9 1868 First phase of rise 2 1 11 To reiterate, in Spiethoff’s analysis, the norms for each stage of this period have already been set by the case of Germany. Moreover, we cannot say that his comparison is precise because when he references interest rates through the discounted bills of the Anglo-Dutch bank, this is in fact an average interest rate. Nonetheless, general tendencies can be observed in his analysis. ]

Based on new relations of production, industrial capital, as a totality, not only re-opens its activities of reproduction, it continually expands commercial credit, and accelerates the formation of funds, so that even if there is an increased demand for these funds, interest rates will fall as a result of an increase in the supply of these funds. The low position of interest rates, which is born out of the recovery in profit rate, makes it impossible, moreover, to not accelerate the social use of funds, and it is because of this that the reproduction process of industrial capital enters the process of development with all of its powers, thereby generally bringing about prosperity. Of course, the expansion of the scale of production does not simply depend on these funds; it is rather based on the transformation of profit into capital. In the period of prosperity, however, industrial capital cannot resist using these convenient funds. Credit plays an extremely important role here. It is here, moreover, that credit more or less comes to speculate on industrial capital.

3. Speculative development and the rise of prices

The advance of the accumulation of capital, which first appears in response to rising demand for means of production, comes to see a general rise in prices when it passes through a recovery of the price of means of production. Of course, while this may not always occur depending on the specific circumstances, generally speaking, the price of raw materials, moreso than finished goods, shows an unusual rise in price during the period of prosperity compared to its extremely low price during the period of recession, which is why there is a tendency, towards an intense absorption of funds socially collected by banks, with the enlargement and buying of means of production. The speculation on buying, in particular, in fact takes place because of the funds of merchant capital, or else from the profits stemming from the funds of various merchant capital that are collected by banks. This does not mean, however, that with industrial capital there is no speculative buying, or that there is not an expansion of speculative production. Even if industrial capital were to mutually share the funds that it forms itself, so long as there exist, as a result of industry, differing degrees of anticipation on the acquisition of profits and on rises in prices, the use of these funds will assume a speculative tendency without fail. It is true, of course, that, the rise of prices of raw materials and other means of production, in addition to the prices of finished goods, recovers out of the fall in prices during the period of recession, leading to speculation across the totality of industrial sectors and a general rise of prices. This is also why there is a rise in the funds that are made available through the mediation of banks. However, as long as the scale of production is constantly enlarging, banks will be able to forecast the formation of new funds and to increase the amount of issued banks notes to a certain degree, thereby bringing about what is commonly called the phenomena of inflation, and, in any case, performing a clear role in the wider speculative movements.[footnoteRef:6] [6: So-called inflation becomes a social problem when governments, incapable of securing funds through its fiscal income, artificially provides these funds by increasing the issuing of paper money and other currencies, thereby leading to an inflation of prices, stemming from a so-called inflation of currency, that affects every level of society in myriad ways. At the same time, during periods of prosperity, there are many cases in which inflation occurs when a rise in price accompanies an inflation of credit. The causes of the rise in price in both cases, however, are different and cannot be confused with each other. The bank’s provision of funds, which stems from an increased issuance of bank notes, originally serves as the ground upon which new funds are formed in relation to the expansion of the production process, whereas in the case of the issuance of government paper money, something else is taking place that is not simply an artificial provision. As recent so-called inflationary policies especially show, the government itself has carried out a policy of raising prices by providing artificial funds during periods of recession, and is, to a certain extent, increasingly adopting a method to merge both ways of providing these funds. In other words, through a rise in prices stemming from an artificial inflation of currency, excess goods (kajō no busshi; 物資) are united with a surplus of populations, thereby contributing towards the formation of new funds. The significance of this, however, cannot be clarified without an analysis of the causes and effects of the rise in prices and its limits. This cannot be viewed as the same thing as fiscal inflation, nor can fiscal inflation be justified simply by referring to it. Here, an extremely complicated relation must be given its proper theoretical exposition, but suffice it to say that it cannot be explained by inflation.]

Generally speaking, it should go without saying that a rise in prices brings about a rise in wages, along with a rise in the price of means of subsistence. In the period of prosperity, however, the cause of the rise in wages is not based on this alone. As described earlier, the rise in price for general commodities itself incites a rise in supply, and reaches a definite limit set by the relationship between demand and supply. Of course, for raw materials and semi-finished goods, whose increased production cannot be carried out rapidly, a rise in price continues on for a significantly long time, thereby causing speculative purchasing. But even so, this does not mean that a rise in supply, stemming from an advance in production, cannot take place. This is not the case, however, with the commodity of labor power. As will be recalled, capital passes through the relative surplus population as it is formed by the growth of the organic composition, but while it is able to produce labor power passively, as it were, a rise in the price of labor power does not mean that capital can raise the supply of labor power on its own. The production of labor power is something that can only come about within the worker’s individual, everyday subsistence itself; capital can do nothing more except produce means of subsistence as commodities, and to thus reproduce labor power indirectly. For example, let us say that a rise in wages provided workers with a little more leeway in their everyday lives, thus accelerating the natural multiplication of workers by an increase in marriages and a decline in mortality rates. Even if this were so, it would not guarantee an increased supply of labor power in the face of capital’s increased demand for labor power in a period of prosperity. The beginning point of the period of prosperity, moreover, is in fact based on the formation of unemployed workers in the period of recession, and along with the accumulation of capital, these workers are mobilized, thereby securing a supply of workers. As long as this is the case, there is no immediate problem, but this alone already reveals the appearance of a restriction on, and a limit to, this supply. For example, when we consider capital’s accumulation that attains a relatively higher growth in its composition of capital by replacing fixed capital, even if it could, by itself, constantly form a working population as a relative surplus population, this process, it must be said, takes place in the transitional period from recession to prosperity, when the surplus population is given. It cannot be said, therefore, that a surplus population is formed due to an advance of accumulation in the period of prosperity, a rise in demand, and also a rising composition of capital. The surplus population is only gradually mobilized and absorbed, and its wages cannot but rise accordingly. Wages do not rise in the same way as a rise in commodities that have been speculatively purchased; they are in fact concealed behind these speculatively purchased prices of general commodities. And while a rise in wages is caused by little more than a rise in prices—and this is something that holds true to a great extent—there is something at its root that capital is powerless to increase.

Unlike the rise of general prices, the rise in wages that accompanies an increased demand for labor power substantially works against profit and erodes the rate of profit. This is not because a rise in wages allows the price of commodities to be raised, however. Properly speaking, the value that is paid out as wages has no relation whatsoever to the value of the commodity formed by labor. The former is paid out to workers, with which they purchase their means of subsistence (seikatsu shiryō), and is consumed in the workers’ everyday life. For capital, this represents a loss of value. With the purchasing of labor power through a payment of value, however, the labor power that is consumed in the production process is turned into labor, thereby forming new values and allowing capital to recover the previously lost value, and to acquire, as surplus value, the portion that is left over. Put differently, in the production process, the value of wages is not preserved and transferred (iten serare) to new commodities like raw materials and other means of production. Capital is able to acquire and obtain surplus value precisely because the value that is formed by labor is a new value. What is paid to workers as wages represents the value of labour power, whereas the new value is formed by labor, or the use-value of labor power. The fact of the matter is that when labor power is in the hands of the worker, it is something that possesses value as a commodity, but as soon as it passes into the hands of the capitalist, it is already no longer a commodity that possesses value, in and of itself. The capitalist, after all, cannot resell the labor power that he previously purchased as a commodity. He can only consume it in the production process and realize it (jitsugen suru) as labor that creates value. Because this point has not always been clearly presented, it is commonly thought that a rise in the value of commodities takes place because of a rise in wages, as if the latter was the same thing as a rise in the value of raw materials. But this could not be further from the truth. A rise in wages reduces the surplus value that is distributed as profit. Simply because profits determine the distribution forms of capital’s surplus value does not mean that it corresponds to an immediate and inevitable rise in wages in individual cases where profits decrease. What is clear, however, is that a rise in wages generally brings about a decline in the profit rate itself.

In actuality, the speculative rise in prices in the period of prosperity that I have described above frequently conceals a rise in wages, and especially possesses a function that essentially inhibits this rise in wages. Consequently, there is a constant difficulty in resolving the problem that this point represents. A general rise in prices that results from speculative buying can only reduce, it goes without saying, the actual increase in the portion of the workers’ consumption that stems from a rise in wages, and cannot immediately reduce the profit rate. The maintenance of the profit rate by a rise in price is in fact nothing but an illusion (gensō). The inventory of over-stocked commodities cannot realize the prices that have been speculatively envisioned. The profit rate, which cannot but fall as a result of a rise in wages, is nothing more than an assumed high rate of profit that exists beneath such illusory prices. Even if we supposed that these commodities could actually be sold, it would not be possible to maintain prices in the same way that increased wages can be substantially reduced, and therefore a decline in the profit rate would inevitably be exposed. Put differently, speculation in the period of prosperity, which is determined by the forms of over-stocked commodities that cannot be sold, expresses a concealment and distortion (waikyoku) of capital’s basic relation to labour.[footnoteRef:7] [7: It seems to me that this relationship also forms the basis of how, as Marx writes, “the conditions of indirect exploitation and the conditions of the realization of this exploitation are not one and the same.” On this point, see the Appendix, “On the demonstration of the foundations of the necessity of crisis in Capital”.]

Of course, the speculative rise in prices, which depends on the making available of funds that are concentrated by the work of various financial institutions centered around banks, and especially on the so-called creation of credit (iwayuru shinyō no sōzō) that prizes the imagined funds formed by the enlargement of the scale of production; this speculative rise in prices will certainly hinder a real rise in wages to the bitter end, but because of this, the rise in the demand for these funds—made possible by the actual sale of commodities and by the supply of funds that are formed by the realization of value— will not be sufficient, and will inevitably lead, in turn, to a progressive rise in the interest rate. Funds will be borrowed, of course, to pay back the principal loans, but will also be borrowed even for making payments on the interest on these loans. Then, depending on the selling off of commodities, when these payments can no longer be avoided, the prices that have been speculatively jacked up now suddenly plummet in the opposite direction, making visible a drastic fall in the profit rate, defaults on payments inevitably break out into the open. It is here that the phenomena of crisis is born.

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