Crisis (economic) - Citizendia

In economics, crisis is an old term in business cycle theory, referring to the sharp transition to a recession. Economics is the social science that studies the production distribution, and consumption of goods and services. The term business cycle or economic cycle refers to the fluctuations of economic activity during its long term growth trend A recession is a contraction phase of the Business cycle. The U See for example 1994 economic crisis in Mexico, Argentine economic crisis (1999-2002), South American economic crisis of 2002, Economic crisis of Cameroon. The 1994 economic crisis in Mexico, widely known as the Mexican peso crisis, was triggered by the sudden Devaluation of the Mexican peso in the early The South American Economic Crisis is the economic disturbances which have developed in 2002 in the South American countries of Argentina, Brazil The Cameroonian economic crisis was a downturn in the Economy of Cameroon from the mid-1980s to the early 2000s A financial crisis may be a banking crisis or currency crisis. The term financial crisis is applied broadly to a variety of situations in which some financial institutions or assets suddenly lose a large part of their value A bank run (also known as a run on the bank) occurs when a large number of Bank customers withdraw their deposits because they believe the bank is or might A currency crisis, which is also called a balance-of-payments crisis, occurs when the value of a Currency changes quickly undermining its ability to serve as

It is still used as part of Marxist political economy, usually in the specific formulation of the crisis of capitalism. Note Marxian economics is not restricted to Marxist economics as it includes the economic thought of those inspired by Marx's works who do not identify with Political economy originally was the term for studying production buying and selling and their relations with law custom and government It refers to a period in which the normal reproduction of an economic process over time suffers from a temporary breakdown. This crisis period encourages intensified class conflict or societal change — or the revival of a more normal accumulation process. Class conflict, also class war or class warfare, is both the friction that accompanies social relationships between members or groups of different

Many or most observers of Karl Marx's theoretical work argue that Marx himself did not come to a final conclusion about the nature of crises under capitalism. Capitalism is the Economic system in which the Means of production are owned by private Persons and operated for Profit and where Instead, his many works (published and unpublished) suggested several different theories, none of them free from controversy.

A key characteristic of these theories is that none of them are natural or accidental in origin but instead arise from the nature of capitalism as a society. In Marx's words, "The real barrier of capitalist production is capital itself. "[1]

These theories include:

The tendency of the rate of profit to fall. The tendency of the rate of profit to fall, commonly abbreviated to TRPF, is a Hypothesis in Economics and Political economy, generally accepted The accumulation of capital involves a general tendency for the degree of capital intensity, i. Most generally the accumulation of capital refers simply to the gathering or amassment of objects of value the increase in wealth or the creation of wealth Capital intensity is the term in Economics for the amount of fixed or real capital present in relation to other Factors of production, especially labor e. , the "organic composition of capital" of production to rise. The organic composition of capital (OCC is a concept created by Karl Marx in his critique of Political economy and used in Marxian economics as a theoretical All else constant, this leads to a fall in the rate of profit, which leads to a slow-down of capitalism and perhaps a crisis. In Economics and Finance, the profit rate is the relative profitability of an investment project of a capitalist enterprise or of the capitalist economy

Underconsumption. In underconsumption theory recessions and stagnation arise due to inadequate consumer demand relative to the amount produced If the capitalists win the class struggle to push wages down and labor effort up, raising the rate of surplus value, then a capitalist economy faces regular problems of inadequate consumer demand and thus inadequate aggregate demand. Surplus value is a concept created by Karl Marx in his critique of Political economy, where its ultimate source is unpaid Surplus labor In economics consumption is the primary motivating force in the wealth or utility maximizing paradigm In Economics, aggregate demand is the total demand for final goods and services in the economy ( Y) at a given time and Price level.

Full employment profit squeeze. Capital accumulation can pull up the demand for labor power, raising wages. Labour power (in German Arbeitskraft, or labour force is a crucial concept used by Karl Marx in his critique of capitalist Political economy If wages rise "too high," it hurts the rate of profit, causing a recession. In Economics and Finance, the profit rate is the relative profitability of an investment project of a capitalist enterprise or of the capitalist economy

In theory at least, these different views may not contradict each other and may instead be complementary parts of a synthetic crisis theory.

See also