by In 1886, Engels made the following prediction in his introduction to the English translation of volume 1 of Marx’s Capital: “The time is rapidly approaching when a thorough examination of England’s economic position will impose itself as an irresistible national necessity. The working of the industrial system of this country, impossible without a constant and rapid extension of production, and therefore of markets, is coming to dead stop. Free trade has exhausted its resources; even Manchester doubts this its quondam economic gospel. Foreign industry, rapidly developing, stares English production in the face everywhere, not only in protected, but also in neutral markets, and even on this side of the Channel. While the productive power increases in a geometric, the extension of markets proceeds at best in an arithmetic ratio. The decennial cycle of stagnation, prosperity, overproduction and crisis, ever recurrent from 1825 to 1867, seems indeed to have run its course; but only to land us in the slough of despond of a permanent and chronic depression. The sighed-for period of prosperity will not come; as often as we seem to perceive its heralding symptoms, so often do they again vanish into air.
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Lord Keynes considers the following as important: Engels’ Failed Prediction of Revolution in the UK
This could be interesting, too:
It is very clear what Engels is saying here: by 1886, he contended to his faithful Marxist readers, England was mired in a “permanent and chronic depression” which would not end until the proletarian revolution arrived.“The time is rapidly approaching when a thorough examination of England’s economic position will impose itself as an irresistible national necessity. The working of the industrial system of this country, impossible without a constant and rapid extension of production, and therefore of markets, is coming to dead stop. Free trade has exhausted its resources; even Manchester doubts this its quondam economic gospel. Foreign industry, rapidly developing, stares English production in the face everywhere, not only in protected, but also in neutral markets, and even on this side of the Channel. While the productive power increases in a geometric, the extension of markets proceeds at best in an arithmetic ratio. The decennial cycle of stagnation, prosperity, overproduction and crisis, ever recurrent from 1825 to 1867, seems indeed to have run its course; but only to land us in the slough of despond of a permanent and chronic depression. The sighed-for period of prosperity will not come; as often as we seem to perceive its heralding symptoms, so often do they again vanish into air. Meanwhile, each succeeding winter brings up afresh the great question, ‘what to do with the unemployed;’ but while the number of the unemployed keeps swelling from year to year, there is nobody to answer that question; and we can almost calculate the moment when the unemployed, losing patience, will take their own fate into their own hands. Surely, at such a moment, the voice ought to be heard of a man whose whole theory is the result of a life-long study of the economic history and condition of England, and whom that study led to the conclusion that, at least in Europe, England is the only country where the inevitable social revolution might be effected entirely by peaceful and legal means. He certainly never forgot to add that he hardly expected the English ruling classes to submit, without a ‘pro-slavery rebellion,’ to this peaceful and legal revolution.” (Marx 1906: 31–32).
Unfortunately, this was another Marxist fantasy that never happened, and it is rather obvious that Engels was just taking up Marx’s own failed predictions at the end of volume 1 of Capital in the chapter called “Historical Tendency of Capitalist Accumulation.”
In reality, by 1888, there was a recovery in Britain and unemployment was falling again. The English working class remained largely impervious to Marxism.
No proletarian revolution occurred, either by violence or in some democratic form (which, in the latter case, Marx thought might actually happen in the UK). Engels was – like so many Marxists – proven wrong.
But what was happening in 1886 to cause Engels to make this doomsday prediction? The answer is as follows:
However, the proper explanation for this economic malaise will not be found in the cult of Marxism. Post Keynesian economics explains it perfectly well as I have shown in numerous posts (see below under “Further Reading”), and even the fact that money profit rates were indeed falling in the 1873 to 1896 period is explained by the prosaic reality that prices were falling in the face of nominal wage rigidity, not some theological Marxist belief that the rate of profit must have an eternal tendency to fall.(1) a nasty recession in the UK in the years around 1885;
(2) high unemployment from 1884 to 1887 (by one estimate unemployment peaked at 8% in 1885 but was no doubt much higher in the cities) (Boyer and Hatton 2002: 667), and
(3) a protracted period of deflation from 1873 to 1896, which sapped business confidence and investments.
In fact, even the neoclassical Alfred Marshall had a better understanding of the economic problems in this period than Engels or Marx ever did (e.g., see here and here).
Further Reading
“Neoclassical and Quantity Theory Explanations of the 1873–1896 Deflation,” January 7, 2015.
“More Evidence on the Profit Squeeze of 1873–1896,” January 5, 2015.
“UK Gross Domestic Fixed Capital Formation in the 1873 to 1896 Deflation,” December 18, 2014.
“Nominal Wage Rigidity in the US and the UK 1865/1880–1913,” December 16, 2014.
“Armitage-Smith on the Profit Deflation of the 1873–1896 Era,” December 15, 2014.
“UK Average Money Earnings 1880–1913,” December 14, 2014.
“UK Real Per Capita GDP 1830–1913,” December 13, 2014.
“British Money Wages in the 1873–1896 Deflation,” December 10, 2014.
“Saul’s The Myth of the Great Depression, 1873–1896,” December 8, 2014
“Alfred Marshall on the Deflation of 1873–1896,” October 14, 2014.
“UK Real GDP 1830–1918,” October 8, 2012.
“Robert Giffen on the Deflation of 1873–1896,” December 7, 2014.
“Alfred Marshall on Business Confidence,” December 3, 2014.
“Alfred Marshall on Wage Stickiness and Debt Deflation,” November 30, 2014.
“The Profit Deflation of the 1890s,” June 13, 2013.
“Alfred Marshall’s Judgement on the “Depression” of 1873–1896,” June 13, 2013.
“S. B. Saul on the Profit Deflation of the 1873–1896 Period,” June 14, 2013.
BIBLIOGRAPHY
Boyer, George R. and Timothy J. Hatton. 2002. “New Estimates of British Unemployment, 1870–1913,” The Journal of Economic History 62.3: 643–667.
Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.