In the year 2000 we published this article by Leon Trotsky on capitalist development. The purpose then was to underline the fact that although capitalism was experiencing a boom, the period we had entered was actually one of overall capitalist decline. As we explained in the introduction “Rather than a new upswing, capitalism is heading for a new slump and a downward curve of development similar to the interwar period.” This was confirmed by the 2008 financial crisis and subsequent events. We are republishing it as an aid to understanding the period we have been through and where we are going.

Introduction (June 2000)

How ideas arise and become a decisive force in history is an obvious question for those fighting for a new society. Clearly what causes great social movements is rooted within society. Marx long ago explained that the key to the development of society is the development of the productive forces - industry, science and technique.

The inability of a social system to develop the productive forces would inevitably give rise to a crisis of the system. However, this does not mean, as the critics of Marxism have asserted, that everything is reduced simply to economics. That is absurd. Other phenomena have to be taken into account: religion, politics, law, morality, etc. The relationship between economics and politics is not a simple mechanical relationship, but a dialectical one. According to Engels: "the ultimately determining element in history is the production and reproduction of real life. More than this neither Marx nor I ever asserted.... The economic situation is the basis, but the various elements of the superstructure... also exercise their influence upon the course of historical struggles, and in many cases predominate in determining their form."

The impasse of the productive forces is the fundamental explanation for the profound political and social crisis of capitalism between the two World Wars. Likewise, the impasse of Stalinism in the Soviet Union and Eastern Europe, due to the bureaucratic strangle-hold over the nationalised planned economy, led to its collapse and the move towards capitalist restoration.

The upswing of world capitalism after 1947 opened up a new period for the capitalist system of society. The reasons for this upswing have been explained elsewhere (See Ted Grant: "Will there be a Slump?"), but the primary factor was the growth of world trade and the expansion of new markets. By 1974, the simultaneous world slump that took place was an indication of the new impasse that capitalism had entered. It was a turning point that had profound economic and political consequences. It began, in the words of Trotsky, a new descending curve of capitalist development. This period was characterised by the return of mass unemployment and a new rhythm in the economic boom and slump cycle. The slumps were much deeper and the booms were of a weak and shallow character. This, in its turn, resulted in profound political instability during most of the 1970s and early 1980s.

So why was the period of the 1970s - with its revolutionary upheavals - so different from the bulk of the 1980s, where capitalism, after the collapse of Stalinism, appeared to experience a new lease of life? The 1980's boom was artificially prolonged by US arms expenditure and the fall in world commodity prices. The 'pump-priming' after the crash of October 1987 also served to stimulate and prolong the boom which lasted until 1990. This boom created illusions in capitalism, strengthened those governments that were in power, and created the material basis for a dramatic shift to the right in the mass organisations. As Lenin said "politics is concentrated economics".

The new recession of 1990-92, gave way to a weak boom which threatened to run out of steam, but has been carried along by the boom in the USA. However, this recovery has had deep political repercussions with the lack of any "feel good" factor and a profound dissatisfaction with existing governments.

The boom of the 1990s has given rise to illusions (once again) that capitalism had overcome its problems and is experiencing a new lease of life. According to bourgeois economists, capitalism will avoid a further slump, experience a "soft landing" and see the re-establishment of sustained economic growth. Some have put forward the idea of a new epoch of growth for capitalism based upon new technology and globalisation. Such a view is completely false. The crisis in S. E. Asia, which spread to Russia and Latin America, has not been resolved. A collapse of the US economy, together with a collapse on Wall Street, will usher in a new downswing for world capitalism, with colossal consequences for the stability of the capitalist system.

Marxism attempts to understand the underlying processes in society, politics and economics. This enables us to understand the general outline of future events. A new qualitative period of crisis has opened up for world capitalism. The expansion of world trade, although sharply down on the figures of the 1950s, no longer has the same effect on the system. It reflects the impasse of capitalism. However, the severity of the crisis is only just beginning to dawn on people. Consciousness always tends to lag behind the objective situation. At a certain point it catches up with an almighty bang. We are in a period of sharp and sudden changes in the objective situation which will inevitably be reflected in all classes in society. As Trotsky explained, it is not the boom or the slump that changes mass consciousness, but the movement between boom and slump and vice versa. This rapid change in economic conditions characterises the current unstable period of capitalist development.

We are republishing Leon Trotsky's article The Curve of Capitalist Development, written in April 1923, as a contribution to the understanding of the period we are going through, with its dialectical relationship between economic developments and politics. With the ideological offensive by the advocates of the New Economic Paradigm, who believe capitalism is experiencing a new period of upswing, it is important to understand the alternative scientific view based upon not only the boom and slump cycle of capitalism, but the curve of development through which the system is passing. Rather than a new upswing, capitalism is heading for a new slump and a downward curve of development similar to the interwar period. Trotsky's article allows us to understand the Marxist method in dealing with this phenomenon.

The Editor, Trotsky.net

In his introduction to Marx's "Class Struggles in France", Engels wrote:

"In judging the events and series of events of day-to-day history, it will never be possible for anyone to go right back to the final economic causes. Even today, when the specialised technical press provides such rich materials, in England itself it still remains impossible to follow day by day the movement of industry and trade in the world market and the changes which take place in the methods of production, in such a way as to be able to draw the general conclusion, at any point of time, from these very complicated and ever changing factors: Of these factors, the most important, into the bargain, generally operate a long time in secret before they suddenly and violently make themselves felt on the surface. A clear survey of the economic history of a given period is never contemporaneous; it can only be gained subsequently, after collecting and sifting of the material has taken place. Statistics are a necessary help here, and they always lag behind. For this reason, it is only too often necessary, in the current history of the time, to treat the most decisive factor as constant, to treat the economic situation existing at the beginning of the period concerned as given and unalterable for the whole period, or else to take notice of such changes in this situation as themselves arise out of events clearly before us, and as, therefore, can likewise be clearly seen. Hence, the materialist method has here often to limit itself to tracing political conflicts back to the struggles between the interests of the social classes and fractions of classes encountered as the result of economic development, and to show the particular parties as the more or less adequate political expression of these same classes and fractions of classes.

"It is self-evident that this unavoidable neglect of contemporaneous changes in the economic situation, of the very basis of all the proceedings subject to examination, must be a source of error."

These ideas which Engels formulated shortly before his death were not further developed by anyone after him. To my recollection they are rarely even quoted - much more rarely than they should be. Still more, their meaning seems to have escaped many Marxists. The explanation for this fact is once again to be found in the causes indicated by Engels, which mitigate against any kind of finished economic interpretation of current history.

It is a very difficult task, impossible to solve in its full scope, to determine those subterranean impulses which economics transmits to the politics of today; and yet the explanation of political phenomena cannot be postponed, because the struggle cannot wait. From this flows the necessity of resorting in daily political activity to explanations which are so general that through long usage they become transformed into truisms.

As long as politics keeps flowing in the same forms, within the same banks, and at about the same speed, i.e. as long as the accumulation of economic quantity has not passed into a change of political quality, this type of clarifying abstraction ("the interests of the bourgeoisie", "imperialism", "fascism") still more or less serves its task: not to interpret a political fact in all its concreteness, but to reduce it to a familiar social type, which is, of course, intrinsically of inestimable importance.

But when a serious change occurs in the situation, all the more so a sharp turn, such general explanations reveal their complete inadequacy, and become wholly transformed into empty truisms. In such cases it is invariably necessary to probe analytically much more deeply in order to determine the qualitative aspect, and if possible also to measure quantitatively the impulses of economics upon politics. These "impulses" represent the dialectical form of the "tasks" that originate in the dynamic foundation and are submitted for solution in the sphere of the superstructure.

Oscillations of the economic conjuncture (boom-depression-crisis) already signify in and of themselves periodic impulses that give rise now to quantitative, now to qualitative changes, and to new formations in the field of politics. The revenues of possessing classes, the state budget, wages, unemployment, proportions of foreign trade, etc., are intimately bound up with the economic conjuncture, and in their turn exert the most direct influence on politics. This alone is enough to make one understand how important and fruitful it is to follow step by step the history of political parties, state institutions, etc., in relation to the cycles of capitalist development.

By this we do not at all mean to say that these cycles explain everything: this is excluded, if only for the reason that cycles themselves are not fundamental but derivative economic phenomena. They unfold on the basis of the development of productive forces through the medium of market relations. But cycles explain a great deal, forming as they do through automatic pulsation an indispensable dialectical spring in the mechanism of capitalist society. The breaking point of the trade-industrial conjuncture bring us into a greater proximity with the critical knots in the web of the development of political tendencies, legislation, and all forms of ideology.

Cycles

But capitalism is not characterised solely by the periodic recurrence of cycles otherwise what would occur would be a complex repetition and not dynamic development. Trade-industrial cycles are of different character in different periods. The chief difference between them is determined by quantitative interrelations between the crisis and the boom period within each given cycle. If the boom restores with a surplus the destruction or constriction during the preceding crisis, then capitalist development moves upward. If the crisis, which signals destruction, or at all events contraction of productive forces, surpasses in its intensity the corresponding boom, then we get as a result a decline in economy. Finally, if the crisis and boom approximate each others force, then we get a temporary and stagnating equilibrium in economy. This is the schema in the rough.

We observe in history that homogeneous cycles are grouped in a series. Entire epochs of capitalist development exist when a number of cycles is characterised by sharply delineated booms and weak, short-lived crises. As a result we have a sharply rising movement of the basic curve of capitalist development. There are epochs of stagnation when this curve, while passing through partial cyclical oscillations, remains on approximately the same level for decades. And finally, during certain historical periods the basic curve, while passing as always through cyclical oscillations, dips downward as a whole, signalling the decline of productive forces.

It is already possible to postulate a priori that epochs of energetic capitalist development must possess features - in politics, in law, in philosophy, in poetry - sharply different from those in the epochs of stagnation or economic decline. Still more, a transition from one epoch of this kind to a different one must naturally produce the greatest convulsions in the relationships between classes and between states. At the Third World Congress of the Comintern we had to stress this point - in the struggle against the purely mechanistic conception of capitalist disintegration now in progress. If periodic replacements of "normal" booms by "normal" crises find their reflection in all spheres of social life, then a transition from an entire boom epoch to one of decline, or vice versa, engenders the greatest historical disturbances; and it is not hard to show that in many cases revolutions and wars straddle the borderline between two different epochs of economic development, i.e., the junction of two different segments of the capitalist curve. To analyse all of modern history from this standpoint is truly one of the most gratifying tasks of dialectical materialism.

Following the Third World Congress of the Comintern, Professor Kondratiev approached this problem - as usual, painstakingly evading the formulation of the question adopted by the congress itself -and attempted to set up alongside of the "minor cycle", covering a period of ten years, the concept of a "major cycle", embracing approximately fifty years.

Construction

According to this symmetrically stylised construction, a major economic cycle consists of some five minor cycles, and furthermore, half of them have the character of boom, and the other half that of crisis, with all the necessary transitional stages. The statistical determinations of major cycles compiled by Kondratiev should be subjected to careful and not over-credulous verification in respect both to individual countries and to the world market as a whole. It is already possible to refute in advance Professor Kondratiev's attempt to invest epochs labelled by him as major cycles with the same "rigidly lawful rhythm" that is observable in minor cycles; it is an obviously false generalisation from a formal analogy.

The periodic recurrence of minor cycles is conditioned by the internal dynamics of capitalist forces and manifests itself always and everywhere once the market comes into existence. As regards the large segments of the capitalist curve of development (fifty years) which Professor Kondratiev incautiously proposes to designate also as cycles, their character and duration are determined not by the internal interplay of capitalist forces but by those external conditions through whose channel capitalist development flows. The acquisition by capitalism of new countries and continents, the discovery of new natural resources, and, in the wake of these, such major facts of "superstructural" order as wars and revolutions, determine the character and the replacement of ascending, stagnating or declining epochs of capitalist development.

Along what path then should investigation proceed? To establish the curve of capitalist development in its non-periodic (basic) and periodic (secondary) phases and to breaking points in respect to individual countries of interest to us and in respect to the entire world market - that is the first part of the task. Once we have the fixed curve (the method of fixing it is, of course, a special question in itself and by no means a simple one, but it pertains to the field of economic-statistical technique), we can break it down into periods, depending upon the angle of rise and decline in reference to an axis on a graph. In this way we obtain a pictorial scheme of economic development, i.e., the characterisation of the "very basis of all the proceedings subject to examination" (Engels).

Depending upon the concreteness and, detail of our investigation, we may require a number of such schema: one relating to agriculture, another to heavy industry, and so on. With this schema as our starting point, we must next synchronise it with political events (in the widest sense of the term) and we can then look not only for correspondence - or to put it more cautiously, interrelationship between definitely delineated epochs of social life and the sharply expressed segments of the curve of capitalist development - but also for those direct subterranean impulses which unleash events.

Along this road it is naturally not at all difficult to fall into the most vulgar schematisation and, above all, to ignore the tenacious internal conditioning and succession of ideological processes - to become oblivious of the fact that economics is decisive only in the last analysis. There has been no lack of caricature conclusions drawn from the Marxist method! But to renounce on this account the above indicated formulation of the question ("it smells of economism") is to demonstrate complete inability to understand the essence of Marxism, which looks for the causes of changes in social superstructure in the changes of the economic foundations and not anywhere else.

Economism

At the risk of incurring the theoretical ire of opponents of "economism" (and partly with the intention of provoking their indignation) we present here a schematic chart which depicts arbitrarily a curve of capitalist development for a period of ninety years along the above mentioned lines. The general direction of the basic curve is determined by the character of the partial conjunctural curves of which it is composed. In our schema three periods are sharply demarcated: twenty years of very gradual capitalist development (segment A-B); forty years of energetic upswing (segment B-C); and thirty years of protracted crisis and decline (segment C-D).

If we introduce into this diagram the most important historical events for the corresponding period, then the pictorial juxtaposition of major political events with the variations of the curve is alone sufficient to provide the idea of the invaluable starting points for historical materialist investigations. The parallelism of political events and economic changes is of course very relative. As a general rule, the "superstructure" registers and reflects new formations in the economic sphere only after considerable delay. But this law must be laid bare through a concrete investigation of those complex interrelationships of which we here present a pictorial hint.

In the last report to the Third World Congress, we illustrated our idea with certain historical examples drawn from the epoch of the revolution of 1848, the epoch of the first Russian revolution (1905), and the period through which we are now passing (1920-1). We refer the reader to these examples. They do not supply anything finished, but they do characterise adequately enough the extraordinary importance of the approach advanced by us, above all for understanding the most critical leaps in history: wars and revolutions. If in this letter we utilise a purely arbitrary pictorial scheme, without attempting to take any actual period in history as a basis, we do so for the simple reason that any attempt of this sort would resemble far too much an incautious anticipation of those results flowing from a complex and painstaking investigation which has yet to be made.

At the present time, it is of course still impossible to foresee to any precise degree just what sections of the field of history will be illuminated and just how much light will be cast by a materialist investigation which would proceed from a more concrete study of the capitalist curve and the interrelationship between the latter and all the aspects of social life. Conquests that may be attained on this road can be determined only as the result of such an investigation itself, which must be more systematic, more orderly than those historical materialist excursions hitherto undertaken.

In any case, such an approach to modern history promises to enrich the theory of historical materialism with conquests far more precious than the extremely dubious speculative juggling with the concepts and terms of the materialist method that has, under the pens of some of our Marxists, transplanted the methods of formalism into the domain of the materialist dialectic, and has led to reducing the task to rendering definitions and classifications more precise and to splitting empty abstractions into four equally empty parts; it has, in short, adulterated Marxism by means of the indecently elegant mannerisms of Kantian epigones.

Instrument

It is a silly thing indeed endlessly to sharpen and resharpen an instrument to chip away Marxist steel, when the task is to apply the instrument in working over the raw material!

In our opinion this theme could provide the subject matter for the most fruitful work of our Marxist seminars on historical materialism. Independent investigations undertaken in this sphere would undoubtedly shed new light or at least throw more light on isolated historical events and entire epochs. Finally, the very habit of thinking in terms of the foregoing categories would greatly facilitate political orientation in the present epoch, which is an epoch that reveals more openly than ever before the connection between capitalist economics, which has attained the peak of saturation, and capitalist politics, which has become completely unbridled.

I promised long ago to develop this theme for 'Vestnik Sotsialisticheskoi Akademii'. Up to now I have been prevented by circumstances from keeping this promise. I am not sure that I shall be able to fulfil it in the near future. For this reason I confine myself in the meantime to this letter.

Leon Trotsky
April 21 1923