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In economics, crisis is a term in Marxist theory, referring to the sharp transition to a recession. See for example created by Shabuntaytwanisha 1994 economic crisis in Mexico, Argentine economic crisis (1999-2002), South American economic crisis of 2002, Economic crisis of Cameroon. A financial crisis may be a banking crisis or currency crisis.

It is used as part of Marxist political economy, usually in the specific formulation of the crisis of capitalism. 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.

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. Instead, his many works (published and unpublished) suggested several different theories, none of them free from controversy.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 accumulation of capital involves a general tendency for the degree of capital intensity, i.e., the "organic composition of capital" of production to rise. 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.

• Underconsumption. 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.

• Full employment profit squeeze. Capital accumulation can pull up the demand for labor power, raising wages. If wages rise "too high," it hurts the rate of profit, causing a recession.

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

• Crisis theory
• International crisis
• "Crisis of Capitalism" by MIA Encyclopedia of Marxism