Institute of Red Professors
In 1929 the Communist Academy in Moscow published "The Capitalist Cycle: An Essay on the Marxist Theory of the Cycle", a 1927 report by Bolshevik theoretician Pavel Maksakovsky to the seminar on the theory of reproduction at the Institute of Red Professors of the Communist Academy. This work explains the connection between crises and regular business cycles based on the cyclical dynamic disequilibrium of the reproduction schemes in volume 2 of "Capital". This work rejects the various theories elaborated by "Marxian" academics. In particular it explains that the collapse in profits following a boom and crisis is not the result of any long term tendency but is rather a cyclical phenomenon. The recovery following a depression is based on replacement of labor-intensive techniques that have become uneconomic at the low prices and profit margins following the crash. This new investment in less labor-intensive technology takes market share from competitors by producing at lower cost while also lowering the average rate of profit and thus explains the actual mechanism for both economic growth with improved technology and a long run tendency for the rate of profit to fall. The recovery eventually leads to another boom because the lag for gestation of fixed capital investment results in prices that continue such investment until eventually the completed projects deliver overproduction and a crash.