Credit, Indebtedness, and Speculation in the Marxian Paradigm: A Reassessment

This paper argues that, in Chapters XXIX and XXX of Volume III of Capital, Marx develops an incisive conceptual framework in which excessive credit creation, indebtedness, and speculation play a critical and growing role in the reproduction of social capital on an extended basis; however, given the decentralized and anarchic nature of capitalist production, it does so in a highly erratic and contradictory manner which only postpones the inevitable day of reckoning. The paper also draws important parallels between Marx's analysis of debt-fuelled crises and the events leading up to the subprime debacle of 2007-08. Finally, the paper contends that had Marx lived to re-write Vols. II and III, he would have explicitly connected the expanding role of credit [which he associated with the development of capitalism] to a significant reduction in the turnover period of capital, thereby boosting the rate of surplus-value, and countering in a highly erratic and contradictory manner, the fall in the rate of profit. The growing role of credit has been ignored in the Marxian literature as an important counteracting factor to the law of the declining rate of profit. It is not mentioned at all by Marx in his famous Chp. XIV, Vol. III of Capital where he discusses other important counteracting forces, nor by Engels [in this particular context] who edited both Vols. II and III.