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This chapter is an introduction to the English version of Karl Kautsky’s essay “Theories of Crises,” which in turn is a review of Michael von Tugan-Baranowsky, Studien zur Theorie und Geschichte der Handelskrisen in England (Studies on the Theory and History of Commercial Crises in England), published in 1901. The chapter contextualizes Kautsky’s essay in the framework of the ongoing revisionist controversy within the Social Democratic Party of Germany and the Second International, and well as of the debate between Marxists and Populists in Russia.

This chapter challenges the denial of “underconsumption” – the role of consumption demand in capitalist reproduction and its paucity in crises – in contemporary Marxism. At stake are better understandings not only of crisis theory but also, inter alia, of imperialism, “reformism,” and Marx's intellectual legacy. The chapter shows how the centrality of consumption demand is underlined in the three volumes of Capital and the Grundrisse, and goes on to discuss the origins, weaknesses, and persistence of this denial. The chapter also shows that Marx did not regard underconsumption as a moralistic argument about unfulfilled need. The denial originates not in Marx but in productionism, the idea that capitalism is a system of “production for production's sake.”

Originating in the overkill of Tugan Baranowski's refutation of the Russian populists’ view that capitalist development was impossible in Russia due to lack of a home market, productionism is based on his attempt to force Marxism into the marginalist and the general equilibrium framework. Despite its antipathy with Marxism, most contemporary Marxist economics are based on it. Inevitably its adherence to Say's Law – the denial of the possibility of gluts in the market – infects the tendency to assume that capitalism's contradictions do not lie in circulation. Productionism's denial of the importance of consumption demand also rests on nonsequiturs, nondialectical thinking, and an underestimation of the contradictions in capitalism Marx identified, other than the tendency of the rate of profit to fall. The chapter ends by showing the centrality of demand in the recent historical evolution of capitalism as reconstructed by Robert Brenner, followed by a discussion of whether underconsumption is “reformist.”

This is the first English version of Karl Kautsky’s essay “Theories of Crises,” originally published in 1902 in Die neue Zeit, the theoretical organ of the Social Democratic Party of Germany. Kautsky’s essay was a review of Michael von Tugan-Baranowsky, Studien zur Theorie und Geschichte der Handelskrisen in England (Studies on the Theory and History of Commercial Crises in England), published in 1901. Kautsky’s review of Tugan-Baranovsky’s book is divided into five sections: (1) “Introductory Remarks”; (2) “The Decreasing Tendency of the Rate of Profit”; (3) The Explanation of Crises by Underconsumption; (4) Tugan-Baranovsky’s Theory of Crises; and (5) The Changes in the Character of Crises. We have translated in full the Sections 3 to 5.

The importance of the market in the modern economic order. - Natural exchange. - The impossibility of a general overproduction within natural exchange. - The money-mediated exchange. - The possibility of general overproduction of commodities. - The market. - Simple commodity production. - The regulation of production by consumption. - Capitalist production. - The lack of relation between production and consumption. - Simple reproduction of capital. - Capital accumulation. - The principle of proportional distribution of production. - The two fundamental contradictions of capitalist economy. - Credit. - Dependency of crises on the contradictions of capitalist economy. - The necessity of crises. - Foreign trade.

Presentation of this theory. - The law of the tendential fall in the rate of profit. - Absolute overproduction of capital. - Relation between market stagnation and the underconsumption of the masses. - Critique of the law of the falling rate of profit. - Lack of necessary relationship between the composition of capital and the rate of profit, proved on the basis of the theory of labor-value. - Marx's theory of surplus-value is untenable. - The essence of the problem of profit. - The problem of profit and the problem of value. - The origin of profit. - Reciprocal relations between the three component parts of social product. - The ethical factor in Marx's theory of surplus-value. - The law of development of capitalism and the conditions of its transformation into socialism.

Nobody concerned with political economy can neglect the history of economic doctrines. Structural changes in the economy and society influence economic thinking and, conversely, innovative thought structures and attitudes have almost always forced economic institutions and modes of behaviour to adjust. We learn from the history of economic doctrines how a particular theory emerged and whether, and in which environment, it could take root. We can see how a school evolves out of a common methodological perception and similar techniques of analysis, and how it has to establish itself. The interaction between unresolved problems on the one hand, and the search for better solutions or explanations on the other, leads to a change in paradigma and to the formation of new lines of reasoning. As long as the real world is subject to progress and change scientific search for explanation must out of necessity continue.

This article provides a detailed investigation of how Lewis revisited classical and Marxian concepts such as productive/unproductive labor, economic surplus, subsistence wages, reserve army, and capital accumulation in his investigation of economic development. The Lewis 1954 development model is compared to other models advanced at the time by Harrod, Domar, Swan, Kaldor, Solow, von Neumann, Nurkse, Rosenstein-Rodan, Myint, and others. Lewis applied the notion of economic duality to open and closed economies.