13 Kasım 2011 Pazar

Evanescent Protocol: Kyoto

In our century, one of the most important problem which humanity lives, is definitely the environmental pollution. So many points that are shown as a reason for this environmental pollution such as profit ambition, power dash, market failure, property rights and also the capitalism as a mode of production. There are so many definitions in different disciplines of environmental pollution. In that case, we should categorize it in an economical terms. Moreover, to do this, we should undertake the capitalist system as a whole and then analyze its effects on the environmental pollution very deeply.

When we look at the historical process of the environment issue in an economic concept, we see that this notion has almost a new characteristic in it from the beginning period of mid-20th century. Environmental economics is a subfield of economics that relates to the with the environmental problems. As National Bureau of Economic Research Environmental Economics Program quotes that Environmental Economics undertakes theoretical or emprical studies of the economic effects of national or local environmental policies around the world. Particular issues include the costs and benefits of alternative environmental policies to deal with air pollution, water quality, toxic substances, solid waste and global warming. Righ along with this quotation, in general, it combines the welfare economics and the theory of economic growth with more recent perspectives on the political economy of choosing policy tools and the ideas of sustainable development. There is a point in an environmental economics that so important to analyze its gravity which consists of the externalities as one of the most critical element of market failure. The common definition is that an externality exists when a person makes a choice that affects other people that are not accounted for in the market price. On the other hand, the basic definition comes from also by Heller and Starrett that defines externality as a situation in which the private economy lacks sufficient incentives to create a potential market in some good and the nonexistence of this market results in losses of Pareto efficiency. In an economic literature, externalities mean in which the unfettered market does not create an efficient output. Thence, to correct this such market failures, it gives some solutions which are advocated for some externalities include environmental regulations, qoutas on pollution, taxes and tariffs on pollution and dirty subsidies. Just at that juncture, the concept of negative externalities take a very important place to understand and analyze the environmental pollution/degradation. As we know that the negative externality is an action of product on consumers that imposes a negative side effect on a third party; it is a social cost. Many of these costs are related with a deep environmental consequences such as climate change, global warming, systemic risk, air pollution, water pollution, soil contamination, radioactive contamination, increasing rate of greenhouse gas, carbon emission and so on... These different kinds of environmental pollution goes into the atmosphere causes progressive natural instability, disorder and discomfort to the ecosystem. For example, apart from its death effects on the human body, for an environmental effects, the carbon dioxide emissions cause ocean acidification, the emissions of the greenhouse gases leads to global warming which also affect the ecosystem in so many ways and soil can become infertile and unsustainable for the plants. We can accrue these examples in so many different types of causes. Because of these negative externalities and its death effects, many nations worldwide has come together in many times and different forms to protect the environment from the adverse effects of pollution and thus to regulate various types of pollution as well as to cut back the high levels of pollution. Although there are lots of pollution types, the greenhouse gas emission is a leading one both for economic discipline and the environmental degradation.

Generally speaking, greenhouse gas emission is a kind of gas that absorbs or emits radiation. This is also a fundamental cause for the greenhouse effect. The primary greenhouse gases in an atmosphere are carbon dioxide, methane, nitrous oxide and ozone. Contribution of the each gases to the greenhouse effect is affected by the characteristics of the gas, its abudance and its indirect effects. The carbon dioxide is one of the most important greenhouse gases. It is also the basic one in an analysis of the environmental economics to understand the binary relations between economic concept and the environmental degradation concept. It should also ascertains more deeply to understand the relations between nations on the issues of the emissions trading, environmental tariffs and taxes environmental pricing reforms, tradeable pollution permits, personal carbon trading and low carbon economy as well as importance of the other greenhouse gases. Admittedly, the problem is related with the economics to a large extent. That's why, the negative externality engages an important place in that situation. In this way, the difference between the social marginal cost and the marginal cost (supply) to a position of demand shows an imbalances also for an economics and environmental degradation. When a negative externality occurs then social marginal cost exceeds marginal private cost (price) and therefore private optimal output is higher than the social optimal output. This divergence between them is also resulted with an inefficieny in resource allocation. Producers of the externalities don't have consider the effects of their actions on others. Especially within the globalization process, these negative effects have started to limit with some agreements and deals worldwide. In this regard, Kyoto Protocol has one of the most important deal for all industrialized and industrializing countries.

The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC), aimed at struggling global warming. It is an environmental treaty achieving the stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous interference with the climate system. It was adopted on 1997 in Kyoto, Japan, at first hand and entered into force on 2005. Literally, 191 nations have signed and ratified the Kyoto Protocol as of September 2011. Under Protocol, 38 countries which are termed as ''Annex I countries'' commit themselves to a reduction of four greenhouse gases (the most important one is carbon dioxide) and all member countries give general commitment. They agreed to reduce their collective greenhouse gas emissions by %5.2 from the 1990 level. These countries have limited to the 16 billions tons of carbon dioxide in years 2008-2012 because of the increasing importance of global warming. However, if the nation which is not disposed this limit then it can sell its permits to another countries within an open market operations. In contrary to this, if the nation which is come to limit then it can purchase permits from another countries with the same way of open market mechanisms. However, in this position, there come into being a considerable problem which is these permits put a new face on things such as being a financial assets like something that can be sell or purchase. That's the reason, it brings the question what are the main weaknesses and the strengths of Kyoto Protocol. For a deeper analysis and understanding, it should have fallen to heart of the main points and should also have compare with the other pollution control methods related with in mitigating the greenhouse gas emissions and protecting the global climate as a whole. First of all, I can start with some weaknesses of the Kyoto Protocol. In my opinion, the main causes of the weaknesses lay down on the flexibility mechanisms of the Protocol. These are emission trading and joint implementation which defined under the Kyoto Protocol intended to lower the overall costs of achieving its emissions targetings. These mechanisms enables countries to achieve emissions reductions or to remove carbon emissions for the atmosphere with cost-effectively and also to allow 38 Annex I countries to meet their greenhouse gas emission limitations by purchasing greenhouse gas emission reductions credits from elsewhere through four different; financial exchanges, environmental finance, projects that reduce emissions in non-Annex I countries and from other Annex I countries. However, the problem starts with this cost-effective/minimizing concept because in some ways, it results with creating negative externalities and disequilibrium between private marginal cost/benefit and the social marginal cost/benefit. First of all, the emission trading is most widespread one between the other mechanisms. Definitely, it is a market-based approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. Generally, a government authority sets a limit on the amount of a pollutant than can be emitted. These limits sold to firms in the forms of emission permits. However, the total number of permits don't exceed the limit. Firms that need to increase their emission permits must buy from those who require fewer permits. In that point, there can be created an issue because it shows the difference of pollution levels among the developed countries and developing countries. Because the developed countries can use the cost-efficient mechanisms with high rate of technologies then they sell their permits in which have low-level technologies countries. In effect, the buyer is paying charge for polluting, on the other hand, the seller is being rewarded for having reduced emissions. It reminds one thing. Although there is a limit on pollution, the situation of the pollution have a continuity. For example, some corporations, firms moves for having a high rate of profit even if they pollute under the limt, they sell it. In many cap-and-trade systems and carbon trading mechanisms, organizations which do not pollute may also participate such as for a firms in United States as a seller. Some economists urge that the use of market-based tools like this emission trading to adress environmental problems instead of prescriptive command and control regulation. It is criticized for being into three reasons: (1) for being excessively rigid, (2) insensitive to geographical differences ,and (3) for being ineffecient. However, they argue that emission trading requires a limit to efficiently reduce emissions and the limit has a governmental regulation mechanisms so if there is a failure to reduce emissions is often punishable which increases the costs of production. Thus the firms choose least-cost way to abide with the pollution regulation. Related with the emission trading, there are two important criticisms which also support our views. First of all, Lohmann in New Scientist magazine of science argues that trading pollution allowances should be avoided as a climate change policy. He gives reasons because, firstly, he supports that global warming require more radical change than the modest changes driven by previous pollution trading schemes. That's why, he also suggests that it requires nothing less than a reorganization of society and technology that will leave most remaining fossil fuels safely underground. His suggestions, in my opinion, is accurate because carbon trading or emission trading as a whole encourages business as usual as expensive long-term structural changes will not be made if there is a cheaper source of carbon credits. Furthermore, another one of the most important criticism come from Annie Leonard emphasized three factors: (1) unjust financial advantages to major polluters resulting from free permits, (2) an uneffectiveness of the system caused by cheating in connection with carbon offsets, and (3) a distraction from the search for other solutions.

Emission trading is the fundamental flexible mechanism in a Kyoto Protocol and I think that the most important weakness for an accurate application to the greenhouse gas emissions control and to stop the global warming which was briefly summarized above paragraph. However, there is also another mechanism that those reduce the power to foreclose the benefits of Kyoto Protocol which is the Joint Implementation. In general, it helps countries with binding greehouse gas emissions targets meet their obligations. For exmaple, a joint implementation suggests that any 38 countries for Kyoto Protocol can invest in emission reduction projects in any other developed countries as an alternative to reducing emissions domestically. Thus, countries can lower the costs of complying with their protocol targets by investing in greehous gas reductions in any other developed countries where reductions are cheaper and then applying the credit for those reductions toward their commitment goal. However, in that position, I have some criticisms about this because it restricts the targets and benefits of the Kyoto Protocol and also restricts the amelioration of global warming. First of all, it can cause concern of imitiated emission reductions. In that situation, leakage is very important that if joint implementation project implies increased emissions elsewhere then the net effect on emission reductions of that project may be limited. Secondly, its complexity as in the process of credit mechanism for Joint Implementation project is another one. It may release the low degree of coordination between joined countries to a portocol. Finally, it brings the question that who will bear the risk of uncertainties among countries.

Thirdly, the last weakness of the Kyoto Protocol is related with the coercion of the environmental effectiveness of the protocol includes three aspects: (1) proposals to allow emission credit for agricultural activities, forest degradation and regrowth, (2) ''unlimited'' use of Clean Development Mechanism (another flexibility mechanism of the Kyoto Protocol; I think that it has some benefits but its unlimited using cause degradation) would allow industrial countries to increase their own mechanism with no guarantee that emissions were reduced elsewhere by a compensating amount and (3) unlimited hot air emission trading threatens to undermine the integrity of the emission trading system as well as increase emission more than would otherwise be the case. Finally, by the way, the Kyoto Protocol calls for the industrialized countries to mitigate greenhouse gas emission %5.2 below 1990 levels by 2012 but the U.S. as a largest producer of greenhouse gases, emiting %20 of the world's total, isn't part of it.

Contemporary production processes use fossil fuels such as oil, which release risky amounts of greenhouse gas emissions into our atmosphere. Moreover, these emissions from agricultural practices, land use change and forestry, and other industrial activities have led to immensely increases in an atmospheric concentrations of different gases, the most important ones are as we know carbon dioxide and methane. As we mentioned above that the Kyoto Protocol is one of the most important formation acting globally to stop the climate change and global warming within a limitation of greenhouse gases. Besides the weaknesses of the protocol, there are also a strengths of the Kyoto Protocol. The potential benefits from Kyoto, basically, are captured by the avoided damages from climate change. Some damages for climate change can be organized as rises in average temprature, less potable and clean water, less biodiversity and severe weather changings. I think that the four principals of the protocol are the most important strengths of the future environmental issues.

1) The principal of commitments. These are related for both countries which are binding to the Kyoto Protocol. This lies mainly in the establishing commitments for the reduction of the greenhouse gases that are legally binding. Separating the countries in different parts makes an important attitude to control the global degradation with making commitments possible.

2) The principle of implementations. The countries are required to prepare policies and measures for the reduction of the greenhouse gases. Furthermore, they are required to increase the absorption of these gases and utilize all policies.

3) Minimizing impacts on developing countries by establishing an adaptation fund for climate change.

4) The principle of compliance. Establishing a committee to enforce compliance with the commitments under the protocol.

These four different principle also shows the consolidation of so many different countries against the climate change. Thanks to this, the utmost importance of the Kyoto has its own power to put together these countries to stop the climate change and makes binding policies for both countries as accepted globally. Moreover, Kyoto does not only make a point of developed countries, but also features on the developing countries and industrializing countries. One of the most important mechanism and strength of the Kyoto is the clean development mechanism which is related with this issue. Definitely, the purpose of the clean development mechanism is to promote clean and sustainable development in developing countries. It is one of the Protocol's project based mechanism in which is designed to promote projects that reduce emissions. It is based on the idea of emission reduction production. The economic basis for including developing countries in effects to reduce emissions is that emission cuts are thought to be less expensive in developing countries than developed countries. It is designed to start off developing countries on a path towards less pollution, with industrialized countries paying for these reductions. There are two main concerns about this mechanism which are additionality of emission reductions produced by the clean development mechanism and imposing projects that are contrary to the development interests of host countries.
Moreover, clean development mechanism plays three important roles in reducing the amount of future climate changes: improves the cost-effectiveness of the greenhouse gas mitigation policies in developing countries, helps to reduce leakage of emissions from developed to developing countries, and finally the boosts transfers of clean, less polluting technologies to developing countries.

OTHER TYPES OF POLLUTION CONTROL MECHANISMS IN ADDITION TO KYOTO PROTOCOL AGAINST THE CLIMATE CHANGE


1) Environmental taxes: It refers to taxes intended to promote environmentally sustainable activities via economic incentives. The policy of proposal may attempt to maintain overall tax revenue by proportionally reducing other taxes (like human labour and renewable resources). These taxes are looked like a Pigovian taxes (attempt to make the private parties involved feel the social burden of their actions). We know that the existence of externalities have a negative effects on environment. To the extent that these environmental taxes, firstly, correct for externalities such as pollution, greenhouse gases. Taxing the negative externalities usually are needed exerting a burden on consumption, and somewhat since the poor consume more and save less a share of their income. Moreover, an environmental taxes can have a future design in which modest consumption levels are priced low and higher consumption levels are priced at a higher levels.The basic one, similiar concept to pollution tax, is a cabon tax:

Carbon Tax
: It is kind of environmental tax levied on carbon content of fuels and form of carbon pricing. Since greenhouse gas emissions caused by the combustion of fossil fuels, a tax on these emissions can be levied by taxing the carbon content of fossil fuels. These taxes offer a potentially cost-effective means of reducing greenhouse gas emissions. Also, it is like a Pigovian tax similar to another environmental taxes. They help to address the problem of emitters of greenhouse gases not facing the full social costs of their actions. It affects disproportionately low-income groups. These taxes, in other words, using tax revenues to favour low-income groups. Thus, it would bring the prices closer to the social degrees. In that situation, it aslo shows its efficient characteristics. In an economic concept, the carbon taxes of its social cost is the marginal cost of emitting one extra tons of carbon dioxide. So, if social cost estimates are complete, a carbon tax should be set equal to its social cost. Emission permits can also have a value equal to its social costs. Although a number of countries have implemented carbon taxes, there are some difficulties with these taxes. According to the Carbon Trust, a carbon tax suffers from combining a set price for carbon along with a transfer of revenue from industry to government. As a result, a revenues can be misguided or it can increase the level of poverty related with an unequal distribution. Secondly, these taxes are whether the emission reductions they bring about actually exist; that is, additionality of emission reductions according to Carbon Trust.


2) Environmental Tariff: It is an import and export tax placed on products being important form, or also being exported to countries with substandard environmental pollution controls. They can be used as controls on global pollution and also be considered as corrective on climate change. It is used because there are some debates on the role that increased trade as internationally plays in increasing pollution. U.S. was the originator of a legislative proposal suggesting an environmental tariff be applied against exporting countries whose exports gained significant cost advantages due to less stringent environmental regulations. This proposal stated as ''International Pollution Deterrence Act of 1991''. On the other hand, these kinds of tariff were not implemented in the past because they were not sanctioned by multilateral trade regimes such as WTO and GATT so that now in so many countries it criticizes considerable and calls for reform for it. For instance, many newly industrialized countries and underdeveloped countries thinks that impose pollution control like tariffs as suspicious. They see that as threat to growth, decreasing impacts on standards, and tactics for developed countries like U.S., China and for Western Europe.


3) Environmental Pricing Reform
: It is the process of adjusting market prices to include environmental costs and benefits. For this theory, externality exists where a market price omits environmental costs/benefits. So, self-interested economic decision in some concepts can lead to environmental harm. Thus, environmental pricing reform can be economy-wide, or more focused on environmental issues, mainly climate change like environmental tax or tariff. It includes green tax-shifting, tradeable pollution permits, or the creation of markets for ecological services. Those are both related with the economic instruments for environmental protection.



TURKEY CASE IN KYOTO PROTOCOL

Turkey is always placed as a special characteristics for its geographical and environmental position all over the world. That's why, it is opened to some difficulties of environmental problems.
Besides its geographical position, the most of the environmental problems for Turkey are basically caused also by the fact that it is developing country for many decades. From the beginning of the time period of development, the governments has supported rapid industrialization, so it has sometimes caused unregulated urbanization and environmental problems. Of course, in this process, environmental regulations were blow over. In Turkey, industrial pollution control is often seen as an exchange among clean environment and economy in terms of employment, production and growth. Thus, the firms are continued to pollute rather than turn back to environmental mentality. However, after a sharp pressures from the side of European Union in the beginning of 21th century, this mentality has been slightly changing at the end. So, the the road of the Kyoto Protocol appeared. Turkey announced in June 2007 its intention to sign the accord but without having any emission targets which was first agreed upon by world governments in 1997. The government postponed signing it for more than a decade because of concerns about the cost to the economy. Signing the Kyoto Protocol does not put an additional burden on Turkey until 2012. It is not obliged to reduce their greenhouse gas emissions to 1990 levels between 2008 and 2012 like the other 38 Annex I countries. Turkey will get involve in climate change decisions post-2012. However, by signing the Kyoto Protocol, Turkey has undertaken the responsibility of passing the necessary legislation to lay the infrastructure for fighting climate change after 2012. Economically, its estimated cost of changes in infrasturcture 58 billion euros. Also, long-term success requires national and international multi-disciplinary efforts by Turkey. Turkey felt an exchange among clean environment and economic-industrial development.

In my opinion, Turkey should have a special position like Annex I countries because albeit it does not emits as much as these countries, turkey has specific geographic location so it affects their ecological system profoundly. First of all, to being in a Mediterranean region is a considerable risk. The most striking effects of climate change on Turkey are expected to be water scarcity, deforestration, drought (especially in Anatolia) and ecological degradation. It is vulnerable to the potential effects of the climate changes. That's the reason, I think that two of the flexibility mechanisms which are tradeable emission permits and joint implementation, should be restricted for Turkey. For example, if Turkey does not exceed the limit of the emission, it should not act as a buyer from other countries' surplus. On the other hand, the protocol should have specified some acute punishment if the limit exceeds. For instance, these punishments can be in a production areas and can also be in an international trade areas with restrictive policies. On the other hand, countries like Turkey's position can be supported in various types such as finacially to change its production mode into green-technologies. Furthermore, Turkey should adopt into more renewable resources. These kind of resources are so important for Turkey because its geographical position also restricts to abate its wastes within a professional way. These wastes can mainly cause air pollution which has a serious problem leading relatively high social and economic costs in Turkey. Moreover, Turkey should use different types of pollution control devices in their industries. The basic ones are dust collection systems, industrial wastewater treatment and scrubbers (baffle spray scrubber, mechanically aided scrubber). Finally, there should be constructed a special regulation and monitoring pollution institutions to determine environmental taxes and tariffs for Turkey. In a conclusion, as a new country, Turkey, in a Kyoto Protocol, for now its regulations and policies have an initial quality. However, in future period of the environmental issues, the above mentioned rules or tools should have mentioned in these protocol for Turkey. Because the increasing rate of average temprature has began to cause water shortages in major cities as well as agricultural areas. Also, this factors may lead food scarcity and poverty in the near future that create pressure for migration that can cause social instability.

3 Kasım 2011 Perşembe

Marxist and Non-Marxist Theories of Economic Crisis ( A different perspectives to analyze)

In every growth, supporters of capitalism claim that crisis tendency causing trouble in capitalist system is overcome. However, when growth is interrupted, economists fall out with each other to make explanations about the issue. The general conclusion drawn from explanations of capitalist system supporters is the fact that every crisis has a different reason reduced to human error, but not affiliated with internal dynamics of capitalism. Bourgeois economists are required to refuse that crisis is specific to the social structure of capitalist production, because all economy theory is established on the basis of following three points:

- Capitalist system arranges itself (it shall be balanced under any condition and situation)

- Main task of theoretical economist is to define the best conditions under which self-organization can be sustained.

- By this way, it will be possible to define any collapse as a consequence of exceptional deviations from norm.

Normal processing of supply and demand powers always guaranties a tendency towards general balance. This means that crisis may emerge as a result of external shocks or internal disturbances preventing and collapsing market balance process.

In the framework of general balance theory, capital acts between production branches as a respond to changes within profit rate arisen due to imbalance between supply and demand. This capital movement is a means for sustainability of rated relation between various branches of competition and correction of disproportions preventing accumulation by smooth relation between supply and demand.

All supply and demand balance in neo-classic theory is provided by mutual relations between interest rate and profit ratio. If any investment deficiency is in question, demand for investment funds shall decrease due to decrease in interest rate re-stimulating the investment. Stable money policy shall guaranty sustainability of this balance. In case of excessive price explosion causing inflation, tight money policies of money authorities are applied to eliminate this situation; whereas, in case of shrinkage (decrease in production, deflation ...), reserve entries applying loose money policies are permitted. Despite overall mathematical details, crisis explanations presented by today’s economists are not different than those introduced in the beginning of 19th century. Regular continuity of economical crisis should be explained and analyzed as a normal part of development tendencies of capitalist production style. This is the task undertaken by Marxism while trying to prove that the crises are specific to the communal structure of capitalist production. Distinguishing feature of Marxist crisis theories is their emphasis on crisis requirements defining objective limits of capitalism and necessity of socialism and representing basic and indestructible features of capitalist production style.

If crises have a contingency nature or they state transition from an accumulation stage, regime or communal structure to any other stage or structure, objective necessity of socialism and communal base of socialist movement do not exist. In this sense, historical materialism theory of Marx is refused. If a reformed capitalism meets needs of labor class, class struggle loses its objective basis. Socialism is reduced to ethical ideal defining set of moral values not having special relation with needs and aims of labor class, not having privileged class base and not having more moral validity than any other capitalist theory. Crisis theory has a central role in Marxism ideology and cannot be understood out of ideological scope. However, it is not sufficient to support Marxist crisis theory on the basis of ideological bases. In this context, it is required to analyze criticisms and seasonal necessities of crisis consisting of capitalist production style in which Marx is considered in general sense without explaining details in a more practical framework. While achieving this, it is important to benefit from theories of philosophers coming after Marx, who analyzed scientific socialism and dynamics of crisis. Crisis theory of Engels and Kautsky, explanation of Tugan Baranowsky regarding crisis necessity, deficient consumer crisis theory, crisis theories about declining profit rate of Rosa Luxemburg and finally, excessive consumption and explanations about crisis are the main theories required to be considered. In following section, these theories shall be described and by this way, internal irregularity of capitalism shall be understood:

Kautsky and Crisis Theory

Excessive production theory was considered as tangible tendency of capitalist development by Kautsky and its base was deficient consumers, although it was not developed well. He reinforces this theory with following statement: “Large scaled modern crisis shaking world markets arise due to excessive production and deficient consumption”. But significant point is relating this statement to market anarchy, not consumption. Kautsky approaches crisis as a side of commercial cycle sustained by successive invention of new markets and their saturation. Kautsky states that only limit of capital accumulation finds markets for raw material supply and products and continuous, as well as excited impulse regarding opening of new markets to provide new buyers emerges accordingly. According to his point of view, source of crisis tendency is lack of information on producers’ side regarding demand for their products as “estimation task of demand for their products is left to their responsibility”. Supply and demand imbalance in any branch of production causes crisis when complex buying and selling network collapses. The reason is anyone does not have buying power, except for producers of metals on which money is printed. Increasing complexity of mutual dependency means increasing risk of crisis. Finally, credits providing unmatched promotion to capitalist development increases possibility of crisis. Kautsky does not propose a deficient consumer or excessive production theory regarding crisis, but proposes a business cycle theory not having distinctive Marxist features (In this scope, it seems similar to Keynesian approach). Flexibility and expandability of modern production means obtainment of credit flexibility and large scaled secondary labor group and rapidly responding a stimulus in which capital increases production and gains profit. According to Kautsky, as opening of new markets triggers explosion of renewed capitalist activities providing new peaks to capitalist production, commercial cycle plays a significant role in sustainability of capitalist accumulation against tangible excessive production trend. Therefore, alternative of trade cycle is not balanced and sustainable economical growth, but it is chronic recession as market limit restricts capital accumulation consistently. This necessity conditions of crises and deepening of successive crises point mandatory collapse of capitalist system and necessity of socialism.

Tugan Baranowsky and Inevitability of Crisis Theory

The most effective commentator of deficient consumption crisis theory is Tugan Baranowsky, who is not actually Marxist, but who uses re-production schemas of Marx developed within second volume of Capital. These schemas are developed to invent mutual relations between production and consumption as to define source of demand for increasing product corresponding with increasing positive values captured by capitalists. Marx showed that source of increasing demand was purchasing of production means and workforce by capitalists in order to increase their capital by re-investing. Conclusion drawn by Tugan is any obstacle may not be in question in front of expanded product, if appropriate proportional relations between various branches of production are sustained. If production branches producing source of income of labors grow more than limits of consumption demand of labor class, crisis may occur. However, this case was a special disproportion case causing not due to limited consumption of labor class (how this can be achieved at subsistence wage level), but due to extraordinary growth of income means. Tugan states that only possible reason of crises is disproportion between production branches and concludes that sustainable accumulation can only be achieved by continuity of proper proportional relation between various branches of production. Tugan believed that commensurateness shall be achieved, because market anarchy means that proper distribution of new investments between various branches of production is not guarantied. Accumulation may continue for a certain period due to credit increase, despite increasing disproportions; but credit cannot sustain these disproportions for an infinite time period. Tugan’s criticism highlights that result of excessive production is not deficient consumption, but disproportion arises when some production sectors grow faster than others. Therefore, crisis arises together with the possibility of generalization of collapse as a chain reaction at a certain branch where production reaches excessive production limits. Disproportion theory of Tugan does not emphasize a tangible tendency theory regarding increasing deficient consumption, but emphasizes a business cycle theory as crises re-establish proportionality and secure new accumulation conditions. As Tugan affiliates disproportion with excessive production tendency, his theory explains that investment planning and proper credit arrangement may improve or destroy seasonal tendencies of accumulation in principle. Most Marxists represent their criticisms by claiming that consumption may provide driving force of capitalist accumulation. To illustrate, Kautsky does not refuse basic issues, but re-interprets orthodox theory by highlighting that disproportionality of deficient consumption is a coincidental feature and necessary tendency of capitalist development. Hilferding states that Tugan analyzes economical categories of capitalist production style of Marx, which was an irrelevant issue, but caused arise of a unusual production system concept for production. Criticisms of Tugan created a gap between those highlighting deficient consumer orthodoxy and those utilizing objections of Tugan to improve disproportion approach.

Rudolf Hilferding and Disproportionate Crisis Theory

Hilferding repeated deficient consumption criticism of Tugan based on the idea that deficient consumption is a special condition of disproportionality. He developed a crisis theory arisen due to disproportionate. His theory is based on trust and cartels, credit and finance institutions. According to Hilferding, new period of capitalism is defined as dominancy of financial capital stating integration of banks and industrial capitals under leadership of banks. This improvement is identified with increase in importance of fixed capital blocking large amounts of capital for a long time period. This decreased mobility of capital and flexibility to respond given to economical fluctuations and disproportinalities. According to Hilferding, this obstacle in front of equalization of supply and demand was a source of crises. Tendency of financial capital is not adjust production with respect to social needs, but it was establishment of central control of banks on production to maximize profits. According to Hilferding, source of this disproportionate was existence of fixed capital. His finance capital theory might be used to reinforce explanation of Engels regarding disproportionate trend; because, it is expected that as role of fixed capital increases, investment decisions shall be more dependent on production conditions and less dependent on temporary imbalances within the market. Hilferding states that crises arise due to unsuccessful mechanisms providing sustainability of complex proportionate relations required to be available in production. Failure of this proportionality causing emergence of crises highlights that proportionality is specific to advanced finance capital stage, not capitalist production style. In general, crisis appears together with emergence of general excessive production. Hilferding states that this has not a relation with missing consumption, but arises due to a decrease following decrease in profit rate of investment. He seems to relate decrease in profit rate with increase in organic composition of capital, but he also adds his pre-crisis observations regarding long welfare period during which prices and profits are high. Hilferding presents a rich cycle statements including deficient consumption, decreasing profit rate, disproportinality and production anarchy. He also criticizes each of these theories. In addition, Hilferding accepts central role of money and credits within the cycle and states that money movements reflect real accumulation conditions. He claims that increase in interest rates before crisis and requirement to secure credit shows suppression of explosion by money deficient suppresses. He also criticizes each of these theories unilaterally. Besides, Hilferding accepts role of money and credit within central cycle and states that money movements reflect real accumulation conditions. He claims that increase in interest rates before crisis and requirement to secure credit shows suppression of explosion by money deficient suppresses. In conclusion, disproportionate theory is excluded by orthodox Marxists in a reformist manner, as it states that failures of capitalism arise only due to market anarchy and may be eliminated by an advanced level of coordination.

Deficient Consumer Crisis Theory of Rosa Luxemburg

While Hilferding develops his disproportionate crisis theory on the basis of Tugan’s deficient consumption criticisms, Rosa Luxemburg attempts to establish deficient consumption theory on the basis of a solid base. He utilized reproduction schemas of Marx to highlight impossibility of capital accumulation in case of non-availability of external markets. Main significance of Luxemburg’s claim is shifting orthodox theory of Kautsky towards a pure deficient consumer theory. This deficient consumption was used to explain imperialist attempts trying to expand the market by destroying production in worldwide before capitalism and to define limits identifying inevitable collapse of capitalism. Luxemburg initiated his works by sharply separating tangible tendencies of capitalist accumulation and its cyclic shape. He explained cyclic accumulation structure as a coincidental consequence of market anarchy, but he claimed that efforts presented to eliminate reproduction problem as a feature of seasonality of crises were a means of coarse economy. Problem highlighted by Luxemburg is what the source of demand is regarding increasing product of capital corresponding with added value increased. This was not a matter for theorists thinking that capital accumulation has its own dynamics, because competition enforces producers to strengthen their powers regardless of market limits as a result of which excessive demand arises due to other capitalists purchasing production means and employing more workers until markets are saturate and crisis emerges. However, Luxemburg claims that if a final market for increase of consumption meta produced by these production means is available, other capitalists shall employ more workers and demand more production means as a result of which investment anticipates an ordinary increase in consumption. When Luxemburg defines consumption as a driving force of capitalist production, it shall be problem to explain how capitalism arises, not how capitalism collapses. Analysis of Luxemburg generally is generally criticized as a misunderstanding of reproduction schemas of Marx. He accepts utilization of reproduction schemas to establish structural possibility of capitalist reproduction of Tugan, but claims that the main problem is dynamic of the impact causing expansion of reproduction of capital.

Crisis Theory of Engels

Economy politics criticism of Engels focuses on economical and ethical malice arisen due to competition. Competition is explained as a consequence of private ownership of production means and as a base of class awareness and periodical crises on which capitalism criticism of Engels is based. Crisis theory of Engels is mainly based on market anarchy. Producers have no knowledge about consumer needs being realized by increase and decrease in prices. Increase and decrease in prices not causes soft balance arrangements of economists, but causes successive depressions arisen due to excessive production and price decreases manipulated by price increases. However, Engels highlights another basic factor that also emerges as a base of crisis tendency. Capitalism is identified with excessive production tendency triggered by competition pressure, which makes crisis tendency systematic, not random. Crises are the most dramatic sign of dynamism of capitalism and tangible excessive production tendency representing the source of historical limits of capitalism. Engels defines displacement of effort within replacement of seasonal growth and depression as a main mechanism making proletariats a reformist class. Economy politic criticism of Engels was an attempt to show that private ownership was the reason of badness of capitalist system. Base of his effort was confliction of economical interests arisen due to private ownership. Private ownership does not only establish the community on the basis of confliction of interest, but also it identifies permanent imbalance between supply and demand. First explanation of Engels regarding this imbalance and crises was presented in terms of instability of arrangement phase occurred due to unawareness of economic actors. Supply is larger or fewer as not to stand up to demand; because, nobody knows size of demand or supply in case of lack of knowledge. Although Engels explains periodical crisis in terms of ignorance of economic actors, it becomes then obvious that supply and demand imbalance is systematic and causes due to continuous tendency towards excessive production as a mandatory consequence of competition. Struggle of capital against capital, effort against effort and land against land makes production excessive downwarding all natural and rational relations. Engels does not explain why excessive growth of production under pressure of competition causes excessive production, but he states that capitalists, labors or land owners consider themselves as unnecessary, as stronger wins and weaker is excluded.

Hobson and Crisis Theory

Reaction against Say Law lies on the basis of objections of Hobson derived of empirical realities, not intangible theoretical base. Consequence of objections and criticisms of Hobson was mobbing of opposite side in associated period during which marginalist cult took the place of classical economy policy and was depending on a point of view perceiving importance of crises less on the basis of principle about effective functioning of market. He claimed that excessive saving in economy cause deficient consumption and accordingly, crises (Hobson was a liberal and Keynes respected his views and included his ideas in his General Theory named book). In his articles, Hobson emphasizes that economy science prioritizes analysis of production process and evaluates consumption as a passive role in terms of production. He highlights that realization of production to perform production activity only cannot be imagined in any community. He also states that economists acknowledge that main objective of production is consumption and meeting final products of community and marginalist cult prioritizing consumption after classical economical policy is not different than classical cult in this sense. Hobson presented relation between development of modern industry and deficient consumption regularly and as a matter of excessive saving and he also presented this claim in same style with Keynes, which increased his importance. According to Hobson, tight competition during free competition period causes emergence of various monopolies and trusts and less accumulation of capital (Monopoly). Expenditure level of this extremely rich group was not as high as their increasing income. Therefore, this group was automatically causing an extraordinary saving increase. Investing these savings to other industrial branches caused facilitation of same centralization in these branches and similar consequences were arising here. Rapid population increase and increase in consumption standards of the community was eliminating consumption deficiency against these savings and investments at certain level, but size of savings were remaining inadequate when techniques using capital in much more efficient way were considered. During last period, Hobson stated that monopolies prevented decrease in prices, as well as increase of consumption. Excessive investment during free competition period was causing excessive production crises and large scaled price decreases caused bankruptcy of many companies as a result of which crisis were emerging. However, while monopolies were realizing capital savings on the basis of more efficient methods, they were creating added capital required to be reinvested by monopoly profits, but preventing decrease in prices and increase in consumption. As a consequence, seasonal crises were arising as their effort regarding investment of their increasing profits in domestic market caused troubles for other investors. According to Hobson, all imperialist policies were harmful not only for weak countries and colonies exposed to crises, but also for countries applying imperialist policies. These imperialist policies in fact consist of methods not creating profit for the community and imposing all loads to taxpayers, increasing power of community classes, not producers, as well as causing social recession. Hobson states that the reason of excessive saving is excessive imbalance in income distribution. He also adds that if income level of workers or working class increases and if more balanced income distribution is achieved, excessive saving and deficient consumption shall be prevented in the community. In conclusion, it was the first time that Hobson presented an analysis of deficient consumer theory explained on the basis of excessive saving. Although his claims, such as saving-investment balance supporting that saving are converted to investment making therefore investments excessive remain in the scope of old classical frame, he presented basis of views of Keynes while interpreting crises.

The Law for the Tendency of Rate of Falling Profit

Law for the tendency of rate of profit to fall can be considered both as the oldest and newest crisis theory. This theory is emphasized as one of the largest internal conflictions of capitalist accumulation limiting itself and its relation with crisis was identified before Marx, by Adam Smith and Ricardo. Such that, economists have no doubt about decline of profit rates as capital accumulation progresses. These cults also include “declining efficiency law” and tendency to initialization of profit rates in economical profit sense. This profit in neo-classical economy is an extra profit remaining after distribution of share of each production factor. However, Marx explains law for the tendency of rate of profit differently under light of capitalist crises. In general sense, average profit rate in a community declines, because it increases as ratio of fixed capital in production to live effort, in other words, as stated by Marx, as organic composition of capital increases. That is, more capital matches with unit effort. However, according to value theory of Marx, live effort materialized in a product creates added value during production process. Idle effort can only transfer live effort amount materialized in it during its production stage to a new product. Residual value increasing value of outputs against inputs in production and representing the main objective for realization of production is created by live efforts. According to Marx, capitalists always direct towards new techniques to decrease costs due to pressure of competition. These techniques are generally create labor saving. In other words, labors are replaced by machines. By this way, rate of dead labor increases against live effort within a product. This also means increase of labor efficiency. Increase of labor efficiency can also be interpreted as more meta production by a unit effort; but this means materialization of less labor force within each product, whether they are live or dead. Therefore, price of products shall decrease and decrease in live effort shall cause decline in profit rate on the basis of certain residual value (rate of exploitation). It is obvious that objective of capitalist accumulation is profit. Accumulation is made to gain profit; if profit rate decreases, accumulation (capital accumulation) decreases. Accordingly, Marx supports that real limit of capitalism is not external matters like competition and natural resources, but it is internal logic, as stated by Ricardo and Smith. Marx sees how temporal is capitalism as a historical production style. According to his point of view, main importance of law for tendency of the rate of profit lies in this statement. This interpretation causes strengthening of his claims about end of capitalism. However, Marx states that this law is not absolute, but it is based on tendencies. In other words, tendencies functioning contrary to this law are also available. Real progression of profit rate consists of power balance between this tendency and opposite tendency. Marx states that this law is balanced by opposite tendencies and new cycles are initiated by events, such as crises. Marx indirectly developed his crisis theory on the basis of law for decline of profit rate; but he perceived the theory as a proof for end collapse, as he acknowledged capitalism as a finite community structure.

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