What is the explanation for capitalism’s repeated crises?
We have ‘external shocks’, Keynesian ‘poor animal spirits’, ‘greedy bankers’, ‘central bank mismanagement’ etc. All fail because economics has a flawed subjective theory of value (marginalism).
The classical economists were getting close with their concept of ‘natural prices’ & ‘market prices’. Although based upon labour time, they wrongly used individual commodity labour times rather than a concept of how much individual commodities could command of society’s limited labour time.
It was Marx that led the way of integrating labour values with the market. Das Kapital shows how ‘labour values’ become ‘prices of production’ (market equalisation of profit rates), which become ‘market prices’ (ebb & flow of supply & demand), & how these prices in aggregate can become inflated by excessive credit – crises of ‘overproduction’ whereby aggregate prices exceed aggregate values. It is this overproduction that allows production to grow temporarily beyond what the market can realise in the longer run (the credit system separates the act of purchasing from the act of paying). People & organisations are paying with credit that has no basis in realised labour values & will never be realised. The chain of credit breaks, fictitious capital along with real productive capital gets devalued & we have a recession. The law of value reasserts itself & prices are brought back into line with values. Printing more money just ‘kicks the can down the road’ & creates an even bigger problem to eventually be addressed. After more than half a century of fiat money, capitalism now faces its biggest crisis.