A Critique Of "Under-Consumption Theories"
2. Marx's Criticism of the Theory of Underconsumption
We have seen that one example of an incorrect theory of crisis is the "underconsumption theory", but what sort of theory is this exactly?
This theory explains crisis, i.e. the fundamental contradiction of capitalism, from capital's exploitation of labor. Hence, this appears at first glance as a very convincing explanation.
Since this theory has a simple appearance it is extremely accessible and has the character of being easily connected with opportunism. Already during the period of the Second International, the Social Democrat Tarnoff offered the proposal that crisis could be overcome through achieving "high wages". Even today this is the set phrase and common view of the JCP and trade union opportunists.
The viewpoint of the advocates of the theory of underconsumption are simplistic. Instead of the equilibrium theorists who, from the simple perspective that production is consumption (demand) and sales are purchases (or purchases are sales), deny general overproduction, they argue that under capitalist production sales and purchases are not in agreement because the workers are unable to buy all of what they produced, and thus over-production is inescapable. Therefore, their solution is to expand the consumption of the workers and raise their standard of living. It is probably a necessity that they adopted the particular slogan:@"overcome depression through raising wages". They argue that as wages are increased crisis can be easily overcome. However, if this were indeed so, the question arises why the bourgeoisie would be unwilling to employ such a simple and effective method. This question is either treated as an insolvable mystery, or is brushed aside with the arbitrary and nonsensical explanation that "the bourgeoisie are stupid."
This theory at first seems quite reasonable. For example, a worker sells his labor power to the capitalist for 8,000 yen a day. In four hours of labor the worker produces products necessary to reproduce his own labor power. In other words, necessary labor is four hours (the currency expression of products objectified by one hour of labor is 2,000 yen). However, the capitalist purchased the right to use one day of labor power, and has no reason to halt labor after four hours. If he did this all of his profits would disappear and he would probably cease being a capitalist. Thus not four, but eight hours of labor are compelled and in this way the exploitation of labor is realized. Even though the worker performs eight hours of labor in one day, he only receives a payment for four hours. The capitalist appropriates, without compensation, one half of the value the worker created. Since the worker only receives one half of the value created (16,000 yen), the workers consumption is "too low" compared to his production. The worker is definitely unable to purchase 16,000 yen worth of goods with his 8,000 yen wage.
However, it should be clear at a glance that the under-consumption theorists' view that under capitalism surplus value would not be realized, and that this portion (surplus) was in fact excessive, and so production exceeds consumption, is complete nonsense.
The problem is easily solved (let's look at simple reproduction). The surplus value, i.e. the part exploited from the worker, is consumed by either the capitalist alone or by others. This part is definitely not something that "cannot be sold" or find a market. Just consider the case of the individual capitalist. For example, it does not arise that the capitalist who invests one million yen and gets 1.2 million yen worth of commodities "cannot sell" them. Of course the capitalist who invests one million yen and through the exploitation of workers becomes a capitalist with 1.2 million yen worth of commodities, can through the mutual exchange of his commodities-of course this includes the surplus value-realize the value of his own commodities. This presents no theoretical-nor practical-difficulty. In "actual" theory the problem (i.e. "conditions of equilibrium"), as Marx clarified in the mode of reproduction, is only that the V+M of the first department (productive department) can be exchanged with the C of the second department (consumptive department).
This is also essentially the same thing for expanded reproduction. The difference between expanded reproduction and simple reproduction is that in expanded reproduction, i.e. accumulation, materially the conditions for accumulation already exist. If these conditions have been satisfied in the production of the previous year, theoretically it is possible for conditions of complete "equilibrium" to continue to be satisfied, and it cannot be demonstrated that the realization of expanded production is "impossible".
For this reason Marx and Engels (as well as Lenin) necessarily criticized the theory of under-consumption.
"It is a pure tautology to say that crises are provoked by a lack of effective demand or effective consumption. The capitalist system does not recognize any forms of consumer other than those who can pay, if we exclude the consumption of paupers and swindlers. The fact that commodities are unsaleable means no more than that no effective buyers have been found for them, i.e. no consumers (no matter whether the commodities are ultimately sold to meet the needs of productive or individual consumption). If the attempt is made to give this tautology the semblance of greater profundity, by the statement that the working class receives too small a portion of its own product, and that the evil would be remedied if it received a bigger share, i.e. if its wages rose, we need only note that crises are always prepared by a period in which wages generally rise, and the working class actually does receive a greater share in the part of the annual product destined for consumption. From the s!
!
tandpoint of these advocates of sound and 'simple' (!) common sense, such periods should rather avert the crisis. It thus appears that capitalist production involves certain conditions independent of people's good or bad intentions, which permit the relative prosperity of the working class only temporarily, and moreover always as a harbinger of crisis." (Capital Volume 2, chapter. 20)
In "Anti-Duhring" Engels states that although 'underconsumption' is as old as mankind, overproduction is a phenomenon that only exists along with capitalism.
In his "Theories of Surplus Value" Marx also writes:
"This was indeed also the case [underconsumption of the masses--Hayashi], and to an even higher degree, in the ancient mode of production which depended on slavery. But the ancients never thought of transforming the surplus produce into capital. Or at least to a very limited extent. (The fact that the hoarding of treasure in the narrow sense was widespread among them shows how much surplus produce lay completely idle.) They used a large part of the surplus produce for unproductive expenditure on art, religious works and travaux publics. Still less was their production directed to the release and development of the material productive forces-division of labour, machinery, the application of the powers of nature and science to private production. In fact, by and large, they never went beyond handicraft labour. The wealth which they produced for private consumption was therefore relatively small and only appears great because it was amassed in the hands of a few persons, who, incidentally, did not know what to do with it. Although, therefore, there was no overproduction among the ancients, there was overconsumption by the rich, which in the final periods of Rome and Greece turned into mad extravagance. The few trading peoples among them lived partly at the expense of all these essentiellement poor nations. It is the unconditional development of the productive forces and therefore mass production on the basis of a mass of producers who are confined within the bounds of the necessaries on the one hand and, on the other, the barrier set up by the capitalists' profit which [forms] the basis of modern overproduction." (MECW Volume 32 pp. 157-8)
In ancient society, even though there was surplus consumption, there was no surplus production. If the cause of surplus production were underconsumption, as the underconsumption theorists claim, then there should have been more violent crises in ancient society than in modern capitalist society. However, it is common knowledge that there were no crisis phenomenon in ancient society. For this reason it is clear that the theory of underconsumption is nonsense-this is also what Marx and Engels said. Of course, this is only a negative criticism, but for the moment it is sufficient to realize the meaninglessness of the Communist Party's theory of underconsumption.
Furthermore, Marx writes of an anonymous author opposed to Malthus' "principle concerning the nature of demand and the necessity of consumption", whose work "contains the essential secret of glut" even though he completely misunderstood Malthus' thought. This anonymous author wrote:
"The very meaning of an increased demand by them" (the labourers) "is a disposition to take less themselves, and leave a larger share for their employers; and if it is said that this, by diminishing consumption, increases glut, I can only answer, that glut is synonymous with high profits".(MECW Vol. 32)
This writer is saying that a decrease in consumption is the magnification of exploitation (i.e. high profit ratio), thus over-supply is synonymous with high profits. With these words he gleefully imagines he has struck at Malthus' logical contradictions. If one follows Malthus' argument, high profits can signify over production, i.e. crisis, but since high profits mean prosperity for capital, what Malthus is saying is a little strange.
This author is ironically saying that Malthus claims that workers are exploited and consumption is reduced and that this is the source of surplus profit. However, as exploitation increases, profits expand, and in a capitalist society prosperity is the magnification of exploitation (i.e. it comes from the level of the profit margin). Therefore, a market surplus has the same meaning as high profits. It is said that the raise in the workers wages will solve the contradiction through increased consumption, but increased wages means that profits will be eroded and this will cause a dilemma for the solution of the crisis. On the other hand, even if the markets for capital are expanded through increased consumption, this would reduce surplus value and thus weaken and scale back the motive for the activity of capital and accelerate the crisis. Therefore, this method is contradictory and nonsensical. This is how this author ironically comments. Within these critical words, Marx then sees the fundamental contradiction of capitalistic production. The approach of the Communist Party is the exact opposite, that is, they are forever stuck in the superficial standpoint of the theory of underconsumption.
In a different place Marx said precisely the same thing where he criticized Ricardo's "denial of the plethora capital".
"Secondly [he overlooks] that the output level is by no means arbitrarily chosen, but the more capitalist production develops, the more it is forced to produce on a scale which has nothing to do with the immediate demand but demands on a constant expansion of the world market. He has recourse to Say's absurd assumption that the capitalist produces not for the sake of profit, for exchange value, but directly for consumption, for use value-for his own consumption. He overlooks the fact that the commodity has to be converted into money. The demand of the workers does not suffice, since profit arises precisely from the fact that the demand of the workers is smaller than the value of their product, and that it [profit] is all the greater the smaller, relatively, is this demand. The demand of the capitalists among themselves is equally insufficient. Overproduction does not call forth a lasting fall in profit, but it is lastingly periodic. It is followed by periods of underproduction etc. Overproduction arises precisely from the fact that the mass of the people can never consume more than the average quantity of necessaries, that their consumption therefore does not grow correspondingly with the productivity of labour." MECW Vol. 32, pp. 101-2)
Marx explained that the profit of the capitalist (today one could say company) stems from the workers' demand (the demand based on the money (wage) the worker earns from selling labor power to the capitalist) being less than the value of the products the workers create. As this demand (i.e. wage) becomes smaller relatively, profits grow correspondingly larger. For the capitalist the workers' demand is certainly considered important, but to expand this demand would require paying more and more to the workers thereby reducing profits. However, for capital the reduction of profit has an absolute limit, namely the collapse of capital itself. Capital only produces to obtain the maximum profit possible, not with consumption as the goal of production. If profits cease then capital ceases production irregardless of consumption. No matter how much demand there is for a given product (i.e. in this sense, consumption), or how much a product meets the needs of the people, if the product c!
!
annot be sold at a profit there is no demand as far as capital is concerned. On the one hand, for capital the exploitation of the workers means the reduction of demand and capital needs to increase this demand. On the other hand, however, capital cannot expand the workers' demand and "sufficiently" secure this demand. If this were done, profits would decrease and this would be fatal to capital. On the one hand, demand must be increased, but on the other hand, this is not possible. Here the limits and contradictions of capital are clearly revealed.
For capital, increasing profits is the source of prosperity and the cardinal presupposition. The expansion of profit is the same thing as capitalistic prosperity, and all other conditions being the same, the increase in profits is only possible through strengthening the exploitation of the workers, that is by decreasing the wage which is the basis of the worker's consumption. The prosperity of capital only becomes a more certain and secure thing through limiting the consumption of the workers within all possible limits, that is, only through the "insufficient consumption" of the workers. Certainly the overproduction of the market-i.e. the "insufficient consumption", especially the workers' "insufficient consumption"-is synonymous with high profits. However, just like Robert Owen and Sismondi, the Communist Party is completely unable to understand this.
/Return to the Contents/