 Good day, it's Professor Resnick again and today I want to first summarize this business cycle that Marx presents to us in Volume 1, Capitalist Business Cycle. So let me begin in terms of what we have already done here before. The capitalist has a capitalists have a rate of profit, let me put this on the white board. They have a rate of profit R for each and every capitalist and that of course again is the surplus value divided by the C plus V and they take the surplus value that is the board of directors of these these respective capitalist corporations and they distribute it to expand divided by C plus V plus all the other distributions that the capitalist enterprises engage in and I call this if you recall K star plus lambda and let's assume that that capitalism is all the capitalist enterprises are going through an expansion so that this is going up and hence this is going up this is going up so we have the we have a capitalist taking their surplus they're growing surplus the rate of profit is growing and they're accumulating more and also expanding their demand for credit the demand for managers the demand for for rents land land and so forth it's a general capitalist expansion this is going to impact as we saw markets so the so this expansion in value is going to impact all the markets that is the demand for labor power the demand for means of production are all going to rise and also the demand for credit the demand for managers the demand for land and so forth all these are going to rise so these demands over here are associated with the lambda these demands associated with both the K star and the lambda demand for productive and unproductive labor power the demand for productive and unproductive capital is as a generalized increase in demand in the society okay that's what expansion means that the markets are being affected by the demand curves shifting to the right across all these markets okay and this in turn if there's no other assumptions made all of this over here is going to say there's going to be a general rise in prices prices in all these different markets that is the price of labor power will rise the price of means of production will rise the price of credit that is the interest rate will rise the salaries of white collar workers that is managers will rise and of course rents will rise in the economy okay so it's going to be a general inflation a rise in market prices of all these inputs into capitalism that may cause that may this all of this may cause then a contraction and the argument here is that the cost rise so that the I'll put new here the new demands on the surplus may exceed the surplus and hence the capitalist have to cut back assuming they don't raise the rate of exploitation which they could but assuming that that doesn't happen then this is a kind of crisis caused the capitalist by the very expansion of capitalism and so the expansion where we started carries within it the seeds of contraction that's a Marxian argument about the business cycle itself can arise out of the very development of capitalism the expansion can cause a contraction okay and businesses capitalist businesses start to cut back because cost of you know the question is how much they cut back no one knows the answer to that question a b the very contraction itself helps to solve this problem because when the contraction occurs the demand curves for credit the demand curves for means of production the demand curves for labor power the demand curves for land for managers and so forth begin to shift back which helps to correct the same problem of an excess demand of these respective markets as the demand shifts back so as the demand shifts back you have excess supplies of labor power reserve army the unemployed excess supplies of means of production credit managers and so forth and hence the ironic twist is that the the the crisis itself helps to solve that crisis okay the initial crisis which was the demands shifting to the right prices rising but then the price rise creates a crisis for each and every capitalist they start to cut back some of these expenditures that shifts the demands to the left and we have a solution to the initial problem okay that doesn't have to happen that that that crisis okay that's only one part of the story the other part of the story that which I presented to you and it's in your reading readings the other part of the story is that this price increase may also lead to let me list it here let me you know there's so many of them so what I'm arguing here there's no inevitability for the contraction the expansion could continue so part of it is that the the capitalists themselves could expand and continue to expand because they get on the revenue side higher prices as I showed you it is true on the cost side they have a problem but on the revenue side they're selling their goods for higher prices for wage goods and higher prices for means of production and hence they'll expand because the this implies that their market rate of profits have risen so that'll induce them to expand that'll shift their supply curve to the right and therefore the prices will not go up as much as you as much as one would expect by the same logic the prices of means of production will rise the prices of means of production will rise so those firms that are producing means of production will expand because their profit rate has expanded because prices have gone up and hence prices will not rise as much as they would otherwise they may not rise at all they could even fall because of this rise in the profit rate here so you gotta you know you got on the cost side prices are going up but on the revenue side the prices of things that they're selling wage goods and means of production are rising and hence that and helps the expansion continue B credit may expand that is you won't get this rise in interest rate you would expect why because the supply of credit shifts to the right why because the state itself intervenes into the system to pump up the money supply which makes credit cheaper so the Federal Reserve Board in the United States intervenes into the market to supply more credit preventing the interest rate from going up okay see the supply of let me write it down here the supply of labor power shifts to the right in the labor market why well in the United States the experience over the last few decades is one of immigration legal and illegal women leaving households and and and entering the labor force to sell their labor power and then returning to the household to take to still do their jobs within the household so the you know as the feminists have shown quite strikingly women have two jobs one in the household one of the household but focusing on on the household how on the outside the household that means that women increasingly sell their labor power outside the household coupled with immigration legal and illegal that shifts the supply of labor power to the right and hence the the the price of labor power doesn't have to rise as much as it did otherwise you can even stay the it could it could fall okay below the the value of labor power giving a benefit to the capitalist the supply of means of production can also shift to the right and hence you don't get the increase here so on the supply on the supply side of the means of production you have two forces going on okay number one the supply of means of production you can shift to the right because the profit rate of the means of production industries goes up and hence the existing firms will have a tendency to increase their supply because it's profitable to do so but then there's new entry okay it's two two effects are occurring here one the existing firms can increase their supply and number two new firms can enter the into industry attracted by the higher profit rate so in the United States for example the firms that are producing means of production can expand induced by the higher prices they'll shift their supply to the right but also new firms can enter the industry foreign foreign means of production produces can export to more to the United States because the favorable prices and those will be increased imports into the United States which will enable the supply to shift to the right and give me another one you know this many of them let me give you two more okay the demand for labor power going back to the labor power market the demand for labor power may not shift to the right as much as one might expect it'll shift to the right but it may not shift to the right as much as one would expect and hence the price of labor power may not rise as much and that's got to do with a rising or composition of capital that is businesses may yes expand and purchase more labor power means of production but they may be portion purchasing proportionally more machines than they are labor power what the economists like to say the capital labor ratio is rising and that means that the demand for labor power will not shift to the right as much as it would otherwise because the capitalists are deploying more machines than they are labor power and hence there'll be less of a tendency for the price to go up that's kind of the computer revolution which is good in the states and elsewhere okay so it's the replacement really of labor power by by machines the other one works on the supply side of labor power suppose like in the United States unions are very powerful so they're able to charge a price unions use their power to get a price of labor power higher than its value well if the state goes on the attack as it has an orbital you know since president Reagan gone on the attack against unions it reduces their ability to get a price a market price higher than the unit value of labor power and that in and of itself will reduce if not a road the ability of workers to get a higher price of labor power when the market labor power market changes so there the market forces are now operating more than they ever did before so if you combine an erosion of union power a higher or organic composition of capital and a shift in the supply of labor power to the right because immigration you have a situation in the United States in which the price of labor power need not arise in fact it could even fall in the US with an expansion so that gives you an idea how there's no inevitability for the contraction to occur because all of these imply you know an expansion can continue so you have these counters you know counter forces operating you know and one is uncertain exactly if the forces on the contraction side the rising prices will be contract market prices will be contracted on the on the other side the revenue side to offset them and produce this continued expansion let me stop there on this particular summary of the extract of the contraction expansion sides of capitalism