Three crises of the capitalist system: 1873, 1929 and 2007

New introduction to ‘Capitalism at a Dead End’

Capitalism, the system of production for profit, has reached a dead end. The plague of mass unemployment, underemployment, low wages, destruction of benefits, social service cutbacks, and mounting poverty is overcoming the system and bringing unrelieved disaster to the multinational working class and the oppressed peoples of the world. In addition to the threat to the working class, the life-sustaining character of the environment of the planet is in dire danger.

An entire generation of workers is facing a dismal future. For a growing majority, capitalism has in store only unemployment, marginal work and unskilled, low-paid jobs as the system incorporates more and more skills into software and machinery. Technology and the world-wide wage competition orchestrated by the employers continue to drive wages down.

Among the most poisonous political and social consequences of the crisis are the intensification of racism, the growth of the prison-industrial complex, the rise in the persecution of immigrants and undocumented workers, and the war on women and lesbian, gay, bi and trans people. The ruling class seeks all means to sow division among the masses in order to divert attention from the failure of the economic system and the growth of obscene inequality.

These are the ultimate and inevitable consequences of the laws of capitalist development, which are what drive the evolution of the profit system. Capitalism has now entered a new stage in which low growth, stagnation and acute crises are the “new normal.” The historic cycle of boom and bust — when the economy, after crashing periodically, rose again and reached new heights — is over.

Capitalism has generated dozens of periodic cyclical crises since at least 1825, when the first real international crisis of overproduction swept the globe. But the present crisis goes far beyond the normal cyclical crises.

Whatever the ups and downs, nothing can lift the system out of this long-term dead end — not trillions of dollars in bank and corporate bailouts, not trillions in military spending for limited wars and interventions, not any band-aid “stimulus” packages.

This book deals exclusively with the present crisis in the U.S., but this is not the first time that capitalism has reached such an impasse. At least twice before it reached a similar dead end, where it could no longer grow; it could only drag society backward toward an abyss.

In fact, the economic crisis that began with the collapse of the housing market in December 2007 resembles the two previous great crises: the crisis of 1873-1896, sometimes called the Long Depression, and the crisis of 1929-1939, or the Great Depression.

The Long Depression was global and in the U.S. was actually a series of severe downturns. The initial downturn began with the economic collapse of a gigantic railroad bubble and lasted from 1873 to 1877. It led to the longest economic contraction in U.S. history, either before or since, lasting 65 consecutive months. A brief recovery was followed by another collapse in the 1880s. The final and most drastic downturn of the period began with the collapse of a second widespread railroad and land speculation bubble.

This crisis lasted nearly until the turn of the century. There was double-digit unemployment and furious class struggle throughout the period — from the railroad strike of 1877 to miners’ strikes in the Pennsylvania coal fields, the Haymarket struggle in 1886 for the eight-hour day, the Homestead steel strike of 1892 and the Pullman railroad strike of 1894. In many of these class battles, workers used armed self-defense against the scab armies of the bosses.

The Great Depression is said to have begun in 1929 with the collapse of a gigantic stock market bubble. However, it was preceded by the collapse of a wild land speculation bubble, which fueled the stock market collapse. That in turn led to massive banking failures and finally a full-scale economic collapse. By 1931 there was 25 percent unemployment in the U.S. A brief economic upturn from 1934 to 1937 was followed by another collapse, which lasted until 1939.

Unemployment was 17 percent at the end of this period and never went below double digits, even during the brief upturn. There were unemployment and hunger marches and municipal general strikes in San Francisco, Toledo and Minneapolis in 1934. From 1935 on there were hundreds of plant occupations across the country, including the legendary, victorious Flint sit-down strike which brought unionization to General Motors. This was a developing pre-revolutionary period.

There are many differences between the crisis toward the end of the 19th century and the one of the 1930s. But there are several important and fundamental similarities, which have great bearing on understanding the current crisis.

In both crises, the automatic functioning of the capitalist market, the normal boom and bust cycle of capitalist development, ran out of steam. Capitalism reached a point where nothing of an economic nature could by itself get the system moving forward and upward any longer. Capitalism was mired in economic paralysis; mass unemployment was overwhelming the system.

Both crises were preceded by long periods of enormous growth of the productive forces, great strides in technology, and major increases in the productivity of labor.

From the middle to the end of the 19th century, the application of science to industrial processes and communications resulted in what is often referred to as the second industrial revolution. There were major improvements in steel production and chemical processes, the widespread use of the internal combustion engine, the development of petroleum drilling, the telegraph and many other advances. These technological developments brought about great leaps in the growth of the productive forces — including the massive development of the railroads.

These leaps forward in science and industry were accompanied by decimation of the Native people and the seizure of their lands, forcing captured African people into chattel slavery that took on a modified form called share-cropping after the Civil War, the annexation of one-half of Mexico and the importation of Chinese labor. All this laid the basis for land grabbing and made possible the building of a transcontinental railroad system, mining and timber empires, and the meteoric growth of U.S. capitalism in the post-Civil War period.

Similarly, in the period from the turn of the 20th century up until the 1929 crash, capitalism took another technological leap forward into the era of mass production. It was the period known for the rise of “Fordism,” i.e., the assembly line, plus so-called “scientific” time-study management — actually, scientific speedup. Economic growth was fed by the mass production of automobiles, new road-building technology, the electrification of manufacturing, the spread of electricity to households, the telephone, the mass production of radios and household appliances, among other things.

Once again, as in the 19th century, the productivity of labor increased exponentially. And once again, consumption could not keep pace with production. Shortly before the economic collapse, production began to decline and profits shrank. The Depression followed.

How did these depressions end?

The Long Depression that had begun in 1873 ended only with the plunge of the U.S. capitalist class into imperialism. The productive forces and the profit system had outgrown the narrow framework of the capitalist nation state. Unemployment in the U.S. declined only with the so-called Spanish-American War of 1898, which brought the U.S. conquest of the Philippines, Cuba and Puerto Rico and the push into Asia and Latin America. This same bloody process was what drove the European capitalists’ “scramble for Africa” in the 1880s.

Likewise, the Great Depression ended only with the build-up for World War II and the war itself, when industry was converted to war production. In the post-war period, the massive means of production, infrastructure and housing destroyed during the war had to be rebuilt.

The present crisis, which began in December 2007, grew out of the same conditions that preceded the two previous crises: phenomenal growth of the productive forces and an enormous increase in the productivity of labor, this time seen most sharply in the rise of the scientific-technological revolution and the digital age.

As in the previous crises, the system has been overcome by capitalist overproduction. Auto, housing, steel and other industries central to capitalism and to employment are shrinking. Industry is contracting because the markets cannot absorb the enormous output. Wages are falling everywhere. Inequality is at unspeakable levels.

While we are at the early stages in the development of the present crisis, the capitalist system, as in the two previous great crises, cannot restart itself despite all the efforts of central banks and capitalist governments.

Even when there is a slight economic upturn, mass unemployment does not recede and in most cases continues to grow. The rise of the “jobless recovery” is a characteristic of the present crisis of capitalism at a dead end.

Because of the extraordinary development of the globalization of production, commerce and banking and finance, the present crisis is being played out on a far wider stage than the previous crises.

The Long Depression and the Great Depression signified that capitalism had outgrown the nation state. They led to the age of imperialism, inter-imperialist rivalry and war. Indeed, the rise of imperialism signified that capitalism had entered into a phase of general crisis, a crisis from which it has never really emerged. The present crisis indicates that capitalism has outgrown the planet itself. Furthermore, it is a threat to sustaining human life on the planet.

As this crisis deepens and becomes more prolonged, just as in the previous crises, the ruling class is escalating its military intervention and aggravating global military tensions. It is expanding its arsenal of destruction. As of the end of July 2012, Washington and NATO are trying to topple the government of Syria, having destroyed the government of Libya. The threat of war against Iran rises steadily over time. The military “rebalancing” in the Pacific and closer military coordination with the Japanese imperialists is a menace to China. And military tensions with Russia have been deliberately stoked with the construction of missile defense systems.

But the options for capitalism that were used to revive the system in previous crises have narrowed. Imperialist expansion once brought a softening of the class struggle at home as the bosses used some of the super-profits to make concessions to an upper layer of the workers in order to keep class peace. Now, in the age of globalized production, global wage competition means spreading low-wage jobs around the world. This has been enabled by the scientific-technological revolution. Class tensions are increasing in the U.S., Europe and Japan. The era of concessions has been replaced by the era of givebacks.[1]

The military machine is already vastly developed and is high-tech. As such, the option of military mobilization as an economic stimulus to pump up the economy has greatly diminished. In addition, the trillions of dollars in capitalist state intervention have failed to revive the system.

As the ruling class runs out of options and moves in the direction of military adventure and political reaction, its traditional measures of recovery can no longer reverse the crisis. Thus the situation is historically favorable to the intervention of the working class and the oppressed to resolve the crisis on a revolutionary basis.

The profit system is entering a stage at which it can only drag humanity backward. The masses of people will come to a point where they cannot go on in the old way because capitalism is blocking all roads to survival. This is the point at which humanity can only move forward by clearing the road to survival, which means nothing less than the destruction of capitalism itself.

[1] This thesis was fully developed by this author in “Low-Wage Capitalism,” World View Forum, New York, 2008, available from and

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