Chapter 6 Economic crises and the theory of the tendency of the rate of profit to fall

One of the main functions of the absorptive class is to minimize the impact of economic crisis within a given national economy and where possible to shift the impact of economic crisis to less-developed or developing economies or indeed to another advanced economy. Hence the absorptive class displays the same feature of capitalism: it is simultaneously both national and international. This process of absorption is not done consciously, of course. It is the way the system has come to operate. Had the system not done so, capitalist economies would have lost a great degree of its capacity for resilience in the face of recurrent crises. Since the industrial revolution gathered momentum in England in the eighteenth century and spread rapidly to a limited number of countries in the world, economic crisis has been commonplace, threatening the very fabric of the economies created by the system. Economic crisis is taken to mean a severe disjuncture between production and consumption, marked by a reduction in economic growth. Depending on one's theoretical position economic crisis is caused by over-production or under-consumption or by some combination of the two. Adam Smith who publishedAn Enquiry into the Wealth of Nationsjust about at the onset of the industrial revolution in England believed that any disjuncture between glut and scarcity was an effect of wrong-minded intervention by government. Left alone market forces would always tend toward the elimination of gluts. Thus, want of employment (the word unemployment was to be invented a 100 years later), so dangerous to the social fabric, would be avoided and capital accumulation would take place steadily in an unimpeded way. However, by the early nineteenth century, the British economy seemed to fluctuate ever more wildly than it had done in less industrial times, and as the urban population grew, such instability was especially feared by the ruling classes in Britain and, later, in Germany, the United States, France and Italy. Clearly, policy intervention by governments took place to manage such crises and the governments sought increasingly to achieve financial and price stability, and in Britain for instance this culminated in the Bank Charter Act of 1844, having 10 years previously introduced legislation aimed at achieving labour mobility with the infamous Poor Law Amendment Act.