Crisis is endemnic to capitalism, writes Alex Snowdon in his monthly Marxism 101 column

Capitalism is a system in crisis. We can see that crisis in its failure to satisfy the material needs of so many people. Inequality is more acute than ever. While a tiny number of billionaires amass unimaginably vast wealth, huge numbers of working-class people globally struggle to make ends meet.

There have been recurring economic crises since the post-World War Two boom ended in the 1970s, most significantly with the financial crash of 2008 and the economic turmoil that accompanied the Covid-19 pandemic.

The conflicts in the Middle East and Ukraine, together with the huge sums spent by governments on the military, illustrate the fact that imperialist conflict remains a core feature of capitalism. The ecological crises, above all climate change, reveal how our existing economic and social set-up threatens the planet and everything living on it. 

Capitalism is perpetual crisis. This is a system that is incapable of anything else: it cannot be benevolently reformed into something rational, humane or stable. Its crises are part of the essential dynamic of the system itself. 

Karl Marx, the greatest theorist and critic of capitalism, recognised the dynamism of capitalism. In the Communist Manifesto, in 1848, Marx and his collaborator Frederick Engels referred to the innovations of the new capitalist ruling class, the bourgeoisie: ‘The bourgeoisie, during its rule of scarce one hundred years, has created more massive and more colossal productive forces than all the preceding generations put together.’ 

The means of production were transformed, with new technologies revolutionising industry and agriculture. Capitalism’s drive to accumulate is built into the system. However, Marx also grasped that the anarchy of the system ensured enormous waste of that potential to improve people’s lives. Capitalism’s dynamism cannot be separated from its irrationality and inhumanity.

Capitalism is a highly social form of production and has created a global working class of billions. However, it is organised on the basis of the market, divided into numerous competing businesses. Rival firms must compete with each other, which often requires a ruthless race to the bottom in slashing pay and conditions, driving up working hours, or increasing exploitation in other ways. 

To survive, the capitalist must exploit their workers in a manner that is competitive with their rivals. The competitive pressure on capitalists largely explains the dynamism and innovation of capitalism.  The pressure to keep ahead of rivals encourages investment in new machinery or technology. Yet it also explains the remorseless exploitation and therefore much of the system’s inhumanity.

Capitalism is also a fundamentally irrational and chaotic system. Production is not coordinated to fulfil human needs. The economy is not planned. Unplanned, uncoordinated competition for profit defines the system.

Production is shaped by the wider market. The whole chain of buying and selling is vulnerable to breaking down at any point in the chain. If it does so, the system can be plunged into crisis. Slump follows boom.

Every time capitalism has experienced a boom, a point has been reached when shortages – of raw materials, of skilled labour, of finance – arise. Capitalists subsequently cut back on production and sack workers. In doing so, they weaken the market for other capitalists. A vicious cycle sets in and there is a slump or crisis.

Marx demonstrated how such periodic crises are endemic to capitalism. The absurdity of ‘overproduction’ emerges in a crisis – goods are stacked in warehouses as people can’t afford to buy them. This terrible waste is driven by a competitive, profit-seeking and unplanned system. Wages are cut, workers are thrown on the dole, and people’s living standards suffer.

The other types of crises in our capitalist world emerge from this core economic dysfunction. Just as individual capitalist firms are in competition, capitalist nation states compete with each other for territory, access to resources and geopolitical influence. This is the basis for wars and military aggression, the enormous waste of military spending, and the ever-present threat of nuclear annihilation.

The ecological crisis arises from capitalism’s ceaseless exploitation of the natural world. Capitalism exploits both labour (the work performed by workers) and nature. Climate change in particular is rooted in capitalism’s exploitative dynamism, with profits put ahead of people or planet. Capitalism is anarchic. It destroys the natural world that it depends upon.

Marx’s deep understanding of the dynamic yet also chaotic and destructive logic of capitalism is why he rejected any notion that the system could be reformed in a more humane or rational direction. Positive reforms, or anything that might ameliorate human suffering, should of course be fought for within the capitalist system.

Ultimately, though, that system must be overthrown and replaced by socialism. This involves cooperative, planned and democratic production for need. Socialism rests upon a cooperative economy geared to fulfilling human needs and to human flourishing – not the irrational, inhumane destructiveness of capitalism.

This article was originally published in the Counterfire monthly freesheet