Marx’s Reasons of Capitalist Economy Collapse


Capitalism has been the evil dog, which has been around for so long, and which has brought many world economies crunching on their heels. The proponents of capitalism have done little in its bad times, only coming up with quick fix means to keep their systems of economies in place without addressing their weakness.The world leaders and financial experts have been out done by the capitalist systems that they maintain. This has been evidenced in the way many capitalist economies handled the recent recession whereby they never addressed the causes but went ahead to cover up themselves by offering recovery plans in form of loans to revive their economies. This essay will explain the reasons of Karl Marx prediction of a collapse of capitalist economy; it will be mainly on the crises and impacts of capitalist economies and a conclusion of the reasons for Marx’s predictions of collapse of the capitalist economy and critical analysis of them given at the end.

Reasons for Failure of Capitalism

Karl Marx in his justification of his fight against capitalism economies predicted that these systems would collapse in future, unless they changed and made progress to cope and reinventing new tactics to handle their weakness. He made several predictions about the crises of capitalist economy and the reasons behind it collapse, they included overproduction, instability due its cyclic nature, over investment in production of fixed assets instead of consumer products, high labour costs brought about by high wages and the individualism in the system in Marxism theory of crises (Mclellan 1988).

According to Karl Marx in capitalist economies, there is over production of goods, which are traded at a profit, and many investments in industries in the attempt to amass large profits, and in order to achieve them, labour costs have to be minimal resulting low employment. This is due to the fact is an individualistic system of economy. In the times of upward swing in these economies, every one for it tends to invest more, which increases production. Thus in the boom seasons there usually is a big stimulation in fixed capital investments like machinery, this is a bad phenomenon since it implies low investments in consumer goods, which creates a crises of low supply of consumer goods. These fixed capital are directed towards more production, but on the onset of the high production, more goods are availed to markets and crises follows. Unemployment, which is at a reduced level during the best season, increases to facilitate the high productivity. In turn, profit margins that drove to the high productivity declines (Friedman 1977). This is crises since the high production of goods is not supported by and an increase in consumption, which warrants it. In contrast, it is mainly driven by capitalist selfish desires to increase their wealth in terms of high profit.

After the increase in employment opportunities, workers numbers increase and start forming trade unions. This increases their bargaining power, they result to work strikes and demonstrations requesting pay rise (Lenin 1992). These results to a reduction in production and the crises further leads to employers lying off workers to reduce and balance out on their bargaining power, thereby workers wages are drastically reduced. During the boom period there ensues high competition amongst capitalist, which requires them to come up with advanced and efficient methods of production, to enhance productivity and their profitability (Femia 1989). This implies that people under these economies are over worked in exchange of poor wages. Moreover, there would be no equality and fairness in working environment. Finally the high competition may result to poor quality of products manufactured which implies adverse effects on the efficiency of the economy, on the other hand , high competition may result to better quality of products which translates to high costs of them in the market , thus the need for measures to be taken to prevent collapse of the capitalist system. The effect is that, due to reduced labour costs and stability amongst the workforce leads to high profitability, and the cycle continues.

The need for improvement is induced by the individualistic nature of capitalists, since they want to cushion themselves against rising labour costs in future. Thus during the boom period, when employment is high they aim at maximal use of the labour force available and their fixed capital. This results to specialization and centralization of the fixed assets according to Karl Marx. During the capital economy boom period whereby most workers are paid minimal salaries, they have little purchasing power to buy the goods produced. Thus the capitalist in order to promote their individualistic, they convince their custodians like the managers to increase workers’ salaries (Evans 1993). This leads to a scenario where the capitalists’ economy calls recession where the governments have to give money to organisations in terms of loans, failure to which the economy may collapse.This in turn enables them to achieve their goals as people will buy their products and thus their system survives again, and the cycle continues.


Marx pointed out that among the main reasons for the failure of capitalist economy comes from cyclic states of booms and burst seasons. This implies that capitalism is unstable and unreliable economy. Over production, which is brought about by the dire, need to devise new modes of production to increase profitability? Thirdly in the capitalist economies there usually is over investment in new modes and means of production these are better and efficient machineries, which are not consumable. There is also the nature of cyclic high salaries, investments costs which puts a burden on the economy. These crises have been evident in the current capitalist economies around the world, which demonstrates that Karls’ predictions and reasons were well thought and carries weight. Contrary to Karl Marx predictions and causes of a collapse to the capitalist economies, if under consumption of products is one of the major causes of the collapse then it would be permanent instead of temporal and cyclical.


Evans, Alfred. Soviet Marxism-Leninism: the decline of an ideology. Westport: Praeger Publishers. (1993).

Femia, Joseph. Political Studies: Gramsci: Marxism’s Saviour or False Prophet? Oxford: Blackwell Publishers. (1989).

Friedman, Edward. Marx and Mao. California: Sage Publications. (1977).

Lenin, Vladimir. The State and Revolution. London: The Penguin Group. (1992).

Mclellan, David. Marxism: Essential Writings. New York: Oxford University Press. (1988).

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DemoEssays. "Marx’s Reasons of Capitalist Economy Collapse." December 23, 2022.