(Published in Research in Political Economy. vol. 14: pp. 119-194. Copyright (c) 1994 JAI Press. Some editing details differ from that version, since this version is directly based on my files.)
(Edited 12/98 and 1-2/99. Comments welcome. I have done some minor corrections and added some bracketed comments to indicate the relevance of this work to recent events and vice-versa. Page numbers from the original publication appear in double brackets.)
(For the entire text of the paper as one file (without recent annotations), clickhere.)
The Causes of the 1929-33 Great Collapse:
A Marxian Interpretation*
Loyola Marymount University
Los Angeles, CA 90045-8410 USA
In lieu of an Abstract:a much shorter version of this paper.
A. Over-Accumulation and Crisis.
B. The Institutional Environment.
II. The International Political Economy.
B. The Interregnum.
C. The Restoration.
D. Deflationary Bias.
F. The Pre-Depression.
III. The United States.
A. Labor Abundance.
B. The Profit Boom.
C. Over-Investment Relative to Demand.
D. The Composition of Capital.
IV. Conclusion: Another Collapse?
A. Nationalist Rivalry.
B. The Monetarist Restoration.
C. The Silent Depression.
Appendix A: Data Sources and Methods.
Appendix B: Mathematical Models.
The Causes of the 1929-33 Great Collapse: A Marxian Interpretation
Why was the Depression so Great? In any study of the historical causes of the depth, breadth, and length of the Great Depression of the 1930s, one must discover the origins of four main phases: (1) the Great Collapse, from 1929 to 1933; (2) the Great Stagnation, from 1933 to 1937; (3) the abortive recovery and recession toward the end of the 1930s; and (4) the actual recovery at the start of World War II. The issue at stake in this paper concerns the first of these. But following the Marxian tradition, this paper finds the causes of the Collapse to be historical and structural: my focus is on what might be called "phase 0," the period from 1900 or so until 1929. This examination should in turn allow us greater understanding of the Stagnation and the later phases, but those are left for other papers.
The world economy of the 1920s was fundamentally unstable -- in the language of cliché, a "house of cards" -- so that the exact nature of the Collapse-inducing trigger (such as the 1929 crash) is less important than the roots of basic instability. The international political economy was characterized by intense nationalist [[p. 120]] competition among the core capitalist powers, what Marxian theorists at the turn of the century termed "Imperialism." After the first major result of this contention, i.e., the First World War, the nationalist competition continued, changing only its form. Simultaneously, the post-War efforts at conservative restoration and profit-promotion, though "paying off" for the ruling classes in the short run, undermined economic prosperity in the long run. Given the post-War international stagnation, conditions in the United States became increasingly important in allowing the world's shaky prosperity of the late 1920s to continue. But this country's growth became increasing unstable, undermining the feeble progress of other countries. Thus, the U.S. receives special attention in this paper. There, a process of over-investment relative to consumption occurred, in which accumulation surged forward despite stagnant real wages and slowing consumer demand. This meant that as the 1920s progressed, the U.S. economy -- and thus the world economy -- became increasingly fragile and prone to ruin.
This paper's order of presentation starts with the abstract and works toward the concrete. The first section sketches a general Marxian framework and states the nature of the debate. Part II applies that theory to the international political economy. Part III discusses events in the U.S., the leading sector of the world economy in the 1920s. Section IV summarizes the conclusions of the paper by comparing and contrasting the 1920s with the era since 1980. This allows some sense of the implications of this paper.1 [For a more up-to-date discussion, click here.]
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[section II] [section III] [section IV]
[appendices] [references] [notes] [short version] [a new analysis of the future]