Marx’s Musings on Financial Crises: Credit and Crises in the Mid-Nineteenth-Century Gold Standard

Abstract

This paper focuses on integrating Marx’s theory of real and financial crises into a theory of complex crises. I argue that in part V of the third volume of Capital, what Engels referred to as Marx’s “disorderly mass of notes” on credit, Marx had the beginnings of a concrete analysis of the three panics—1847, 1857, and 1866—which wreaked havoc in mid-nineteenth century Britain. He argued that the relationship between the real economy, the rules of the game of the mid-nineteenth century gold standard, and the emerging credit system shaped the complex nature of the era’s downturns, as well as the contradictory role and relative effectiveness of the Bank of England in managing the era’s periodical outbreaks of financial disorder.

Appendix

The daunting problem of editing and making sense of this part of Marx’s Capital was made clear by Engels:

The greatest difficulty was presented by Part V [on the credit system] which dealt with the most complicated subject in the entire volume. And it was just at this point that Marx was overtaken by one of the above-mentioned serious attacks of illness. Here, then, was no finished draft, not even a scheme whose outlines might have been filled out, but only the beginning of an elaboration — often just a disorderly mass of notes, comments, and extracts. I tried at first to complete this part, as I had done to a certain extent with the first one, by filling in gaps and expanding upon passages that were only indicated, so that it would at least approximately contain everything the author had intended. I tried no less than three times, but failed in every attempt, and the time lost [perhaps as much as 10 years] in this is one of the chief causes that held up this volume. At last I realized I was on the wrong track. I should have had to go through the entire voluminous literature in this field, and would in the end have produced something that would nevertheless not have been a book by Marx. I had no other choice but to more or less cut the Gordian knot by confining myself to as orderly an arrangement of available matter as possible, and making only the most indispensable additions”. (Marx 1974: 3, 4)

Added to this, Marx never even intended to provide a complete work on the credit system in Part V (Marx 1974: 3, 400).

Perelman optimistically likens the problem of deciphering Marx’s “disorderly mass of notes” on crisis theory to imagining what Michelangelo’s unfinished work Slaves would look like if completed. “Like Michelangelo’s Slaves, Marx’s crises theory has many unfinished details” (Perelman 1987: 2–3).

My perspective is that making sense of Part V is equivalent to assembling a complex jigsaw puzzle with many missing pieces, pieces that do not belong in the puzzle and must be discarded, and with no precise idea of what the completed puzzle is supposed to look like. Add to that, it is a puzzle that Engels devoted several years to and could not solve.

This means that critics of a project to construct a “Marxian theory of crisis“ out of Part V have the right to wonder if the whole exercise is not just a Rorschach test in disguise! After all, the puzzle cannot be assembled unless one pretends to know what the completed puzzle should look like before one starts.