The article, the introduction to crisis theories is an article that attempts to explain the crisis that is found in the capitalist countries. In a capitalist economy, the citizens own the factors of production and hence the government has no control over the resources. The citizens make the major production decisions. Since there is competition, the resources are carefully exploited in an attempt to maximize profits (Anwar, 220). The article tries to identify the failures of capitalist economy. The failures in the economy and in political sector are what the article refers to as crisis. Even though there are periods of high profits (Boom), there are times of low profits (recession). The article concentrates on explaining why there are times when there are low profits regardless of the expectation those capitalistic economies with perform well due to the appropriate allocation of resources.
According to the article, capitalist economy consists of economic units whose interests’ conflict even though these units are interdependent. For examples, capitalists want to pay the lowest wages while employees are demanding the highest wages. In this regard, it is expected that the economy will be efficient in production activities (Anwar, 221). The article describes three reasons why the performance of the economy is not excellent as it is expected. The article accepts the fact that it is not possible to explain the failures of the economy without explaining the reasons for its good performance during the boom period. The first principle that the article deal with is the belief that capitalistic economy is a self regulating economy whereby any deviation from the equilibrium stimulates forces that tend to restore the original state.
The author argues that according to the classical economists, the adjustment is easy and smooth. On the other hand, Keynes arguments are that the adjustment may take a long time and may be erroneous. The capitalists usually produce their products from the natural resources. The political system believes that there is no need to intervene in the capitalistic market. However, it will be noted that the needs of the human needs are unlimited (Anwar, 223). This is what triggers crisis. The available resources are not able to satisfy the needs of the human beings and this leads to the failure of the system. Since there is no interference in the system, the adjustment to the equilibrium position is very slow. This is what causes crisis in the capitalistic system. To an extent, the economists tend to think that self adjusting mechanism is not the best response in capitalistic economy due to its limitations.
The economic cycles in capitalist economic cannot end according to the article. This is because unexpected events such as lack of rain and outbreak of wars bring about the economic cycles which are the crisis according to the article.
The other reason for the failure of capitalism according to the article is explained by the fact that capitalism is incapable of self expansion. The conflicts between workers and the employers and also between capitalist and capitalist increases to a large extent and ends up in a crisis (Anwar, 221). It is believed that capitalist economy is always performing its best such that one can only benefit at the expense of another. If the wages of an employee are increased, then some employees are to be laid off so that the capitalist still gains profit as usual. The other thing is that since the capitalist pay low wages to the employee, there is lack of effective demand. The amount paid to workers cannot buy all what is produced. What is not consumed is reinvested and this leads to more output that is not demanded (Anwar, 222). This overproduction is what is described as the crisis. The results of this are that the investors will have to produce less to meet the low demand. This crisis can only be solved by if the excess products are sold to other countries. This is why the author of the article argues that capitalism is not capable of self expansion.
The other factor that leads to crisis in the capitalists economies is the objective to continue accumaling profits which are described as the self limiting factor as described by the article. In this case, as it has been observed in the second factor, the solution to increased demand is solved by exporting the output. However, different capitalist economies will compete for the foreign market until it is flooded with goods. The capitalists producers who are not able to compete effectively are competed out and their profits decline (Anwar, 225). With the objective of minimizing costs, the capitalists seek labor from poor countries that are willing to be paid less and these further increases the goods in the market causing more crises. As the number of competitors reduces, monopolies arise in capitalists countries. This leads to inefficiencies in production. In addition, the successful capitalists accumulate their wealth, expand and their big size cause inefficiencies due to impossibilities of effectively managing the big sizes.
As more employees are employed from various countries, less people are willing to be employed at the low wages. In addition, the already working employees are already demanding more pay. These conflicts in the capitalist economy are what lead to their failure.
In conclusion, it can be seen that from the article that the capitalist economy is very productive. However, there are many problems that are inevitable that lead to the crisis associated with the system. Generally, the successes of the capitalistic economy are what lead to its failure finally as observed from the economy. The author has applied various theories to come up with the conclusion. Some of the theories include the orthodox theory, Keynesian theory, Marxist theory and the classical theory.
Work cited
Anwar Shaikh. An introduction to the history of crisis theories. U.R.P.E New York 1974 Print.
