ABSTRACT
This chapter provides a brief discussion of Marxist crisis theories. These theories explain the long-term economic crisis caused by the internal contradictions of capitalism, leading to the potential for underconsumption or overproduction, and the tendency for the profit rate to fall. The tendency of stagnation, which is a key internal contradiction of the capitalist system, happens whenever wage increases fail to keep up with the rate of expansion of output due to the resulting inadequate aggregate demand – unless capitalist demand for consumption or investment is able to absorb it. The profit/wage squeeze approach suggests that the main cause of the decline in the rate of profits is the decline in profit share resulting from increasing union militancy. Regarding the tendency for the rate of profit to fall, the chapter briefly summarises i) what role the tendency for the falling rate of profit played in Marx’s thinking, ii) different views on how to measure the rate of profit, and iii) alternative accounts for the sources of change in the rate of profit in recent empirical work.
