Essay Relating Marxist Theory with the Business Cycle in Economics

Topics: Supply and demand, Keynesian economics, Economics Pages: 3 (914 words) Published: May 6, 2012
Bheki Mhlanga: Marx question essay How does an over-abundance of goods produce an apparent "famine" (depression)? Is it possible to produce too much as Marx contends and if so, how can such overproduction be prevented? When Marx says over production causes famine he is referring to the economic/ business cycle. This is a theory which had been confirmed by the ‘the panic of 1825’a stock market crash that started in the Bank of England arising in part out of speculative investments in Latin America, including the imaginary country of Poyais.(1) This is how it works:

The growth trend refers to potential Gross domestic Product (GDP) or simply the level of economic growth, which is desiredi.e. in which the level of unemployment neither below nor above the optimal level. The bending arrows represent the actual level of economic growth achieved or RealGross domestic Product (RGDP). This is alsocalled real output aslabeled on in the diagram. Every few years due to fluctuations in Aggregate Demand andAggregate Supplythe economy experiencesrecessions (troughs) and booms (peaks) i.e.


rapid decline and rapid growth in the economy.(Aggregate demand is the total amount of goods and services that all buyers in an economy want to buy at different prices, Aggregate supply is the total quantity of goods and services produced in an economy at different price levels) This happens in perpetual cycles that cannot usually be accurately predicteduntil it is too late. Governments and the market try to ease the effects of these cycles. When Marx says “a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed” he is referring to the collapse of markets, the closure of business and the loss of jobs that happen during recessions. And when he says“famine” and “a state of momentary barbarism” he is talking of the effects of these collapses such as...
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