Facing the Crisis of 1929: Economic Equilibrium or Failure of Capitalism?

This chapter examines Oskar Lange’s intellectual and political engagement during the Great Depression (1929–1934). In Poland, one of the countries hardest hit due to its agrarian structure and deflationary policies, Lange emerged as a key leftist theorist who blended Marxist critique with insights from marginalist economics. The chapter analyses his dual focus: (1) a socio-political critique of monopoly capitalism, emphasising the state’s role in exacerbating economic crises and imperialism; and (2) a theoretical exploration of economic equilibrium inspired by Walrasian general equilibrium theory. In his 1931 pamphlet, “The Role of the State in Monopoly Capitalism”, Lange argues that monopolies, supported by state intervention, distort income distribution and fuel class conflict, ultimately pushing capitalism towards collapse. In addition, his 1934 model of a socialist planned economy rejects the notion that capitalism can allocate resources efficiently or ensure full employment. Paradoxically, his 1932 article on economic interdependence (“Die Allgemeine Interdependenz der Wirtschaftgrößen”) aligns with the mathematical rigour of the Lausanne School, advocating for a synthesis of Walrasian general equilibrium and Marshallian partial equilibrium methods. The chapter highlights Lange’s unique synthesis of revolutionary politics and analytical economics, reflecting his belief that socialism is the solution to the crises of capitalism.