A Critique Of "Under-Consumption Theories"
5. "The Cause of Crisis"-"Limited Consumption" and the Development of Unrestricted Productive Power
Marx also emphasized that "limited consumption" has important meaning for crisis. However, the question is what meaning, and in what sense does it hold important meaning. It is completely meaningless to explain crisis as merely "insufficient consumption" and thus propose solving crisis simply through an expansion of consumption, i.e. a wage increase and an alternation in distribution.
Marx repeatedly said that the true cause of crisis is not limited consumption, but capital itself, the limits of capital. The cause and basis of crisis is precisely the limits of capital; crisis is not the result of insufficient consumption. Likewise, the basis of overproduction is not insufficient production, but the "limits" of capital. The problem is capital itself.
What does Marx mean, exactly, by the expression "the limits of capital" or "capital itself"?
The most characteristic phenomenon of crisis is overproduction. In other words, a situation in which commodities are produced which do not find a demand and unsold commodities pile up (in some cases they are burned and in others thrown into the ocean). The superficial view when faced with this phenomenon (currently represented by the JCP and trade unionists, as well as Keynesianism)-says that since consumption is insufficient there must be overproduction, i.e. production that exceeds consumption. Since capitalistic production always keeps the workers wages at the minimum level needed for its existence this view seems to be entirely justified. These are the actual conditions for the prevalence of the theory of underconsumption.
Marx was in fact opposed to this common view and consistently denounced the theory of underconsumption and emphasized that the problem was not simply one of underconsumption, but the original "limits" existing in capital itself, the essential limits within the capitalistic means of production. According to Marx, the expression "overproduction" conveys a mistaken understanding because it gives the illusory impression that society's most essential needs are satisfied. However, as any worker knows, despite even the most urgent needs of the workers being limited, the occurrence of crisis, i.e. overproduction, is not at all rare, but in fact common. In this sense, it is definitely not a question of the demand or the "absolute" needs of society. For Marx the question is "the capitalists' profit", not the needs of society i.e. the producers. On this same point Marx criticized Ricardo who, following Say, offered the concept that demand is supply and supply is demand (or production is consumption and consumption is production). For Marx this view completely ignored the particularity of capitalistic production. Marx wrote:
"But the whole process of accumulation in the first place resolves itself into surplus production, which on the one hand corresponds to the natural growth of the population, and on the other hand, forms an inherent basis for the phenomenon which appear during crises. The criterion of this surplus production is capital itself, the scale on which the conditions of production are available and the unlimited desire of the capitalists to enrich themselves and to enlarge their capital, but by no means consumption, which from the outset is inhibited, since the majority of the population, the working people, can only expand their consumption within very narrow limits, whereas the demand for labour, although it grows absolutely, decreases relatively, to the same extent as capitalism develops. Moreover, all equalisations are accidental and although the proportion of capital employed in individual spheres is equalised by a continuous process, the continuity of this process itself equally presupposes the constant disproportion which it has continuously, often violently, to even out." (MECW Volume 32 pp. 123-4)
Many things are discussed in this passage. The first point emphasized is that the "limit" of capitalistic production, that is, production with the aim of surplus value, is not limited production, but "capital itself". Marx positions "the scale on which the conditions of production are available" on one hand, and "the unlimited desire of the capitalists to enrich themselves and to enlarge their capital" on the other, and emphasizes the contradiction and struggle between them. This is at the foundation of the explanation of crisis. The repeated use of this concept in the same expressions shows us that this is fundamental to Marx's thought. Expressed in slightly different and more general terms, this is the contradiction between the capitalistic relations of production and the rapid, anarchical development and expansion of the productive forces within them.
In this passage Marx also insists that the limits to the production of surplus value are not consumption limited from the outset, which should make it even more clear that the JCP's theory of underconsumption has nothing to do with Marxism. In the case of consumption, under capitalistic production consumption is limited "from the outset"-the exploitation of the working masses by capital is the condition which precedes their labor and existence. Removing this condition leads to a circular argument which amounts to the same thing as proving the "impossibility of capitalistic production".
The impulse to gain wealth and the impulse of capitalization are definitely not the same thing. The impulse to save is not particular to the capitalist, but can be seen in ruling classes preceding the capitalists. The essential characteristic of capitalists is not only their impulse for surplus value, but the impulse for capitalization, i.e. to accumulate capital and expand reproduction. This objective is not merely to expand consumption or accumulate wealth, but to reinvest capital, exploit labor on a greater scale, and obtain ever larger profits. Moreover, this inevitably includes, or is internally connected to, a lowering in the value of commodities through general competition and the increase in productive power, the ruin of many capitalists and the concentration of capital, an increase in the organic composition of capital, and a trend towards decreased profit ratios.
Let's look at a few representative passages:
"Assuming the necessary means of production, i.e. a sufficient accumulation of capital, the creation of surplus-value faces no other barrier than the working population, if the rate of surplus-value, i.e. the level of exploitation of labour, is given; and no other barrier than this level of exploitation, if the working population is given. And the capitalist production process essentially consists of this production of surplus-value, represented in the surplus product or the aliquot portion of commodities produced in which unpaid labour is objectified. It should never be forgotten that the production of this surplus-value-and the transformation of a portion of it back into capital, or accumulation, forms an integral part of surplus-value production-is the immediate purpose and the determining motive of capitalist production. Capitalist production, therefore, should never be depicted as something that it is not, i.e. as production whose immediate purpose is consumption, or the !
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production of the means of enjoyment for the capitalist. This would be to ignore completely its specific character, as this is expressed in its basic inner pattern.
It is the extraction of this surplus-value that forms the immediate process of production, and this faces no other barriers than those just mentioned. As soon as the amount of surplus labour it has proved possible to extort has been objectified in commodities, the surplus-value has been produced. But this production of surplus-value is only the first act in the capitalist production process, and its completion only brings to an end the immediate production process itself. Capital has absorbed a given amount of unpaid labour. With the development of this process as expressed in the fall in the profit rate, the mass of surplus-value thus produced swells to monstrous proportions. Now comes the second act in the process. The total mass of commodities, the total product, must be sold, both that portion which replaces constant and variable capital and that which represents surplus value. If this does not happen, or happens only partly, or only at prices that are less than the price of production, then although the worker is certainly exploited, his exploitation is not realized as such for the capitalist and may even not involve any realization of the surplus-value extracted, or only a partial realization; indeed, it may even mean a partial or complete loss of his capital. The conditions for immediate exploitation and for the realization of that exploitation are not identical. Not only are they separate in time and space, they are also separate in theory. The former is restricted only by the society's productive forces, the latter by the proportionality between the different branches of production and by the society's power of consumption. And this is determined neither by the absolute power of production nor by the absolute power of consumption but rather by the power of consumption within a given framework of antagonistic conditions of distribution, which reduce the consumption of the vast majority of society to a minimum level, only capable of varying within more or less narrow limits. It is further restricted by the drive for accumulation, the drive to expand capital and produce surplus-value on a larger scale. This is the law governing capitalist production, arising from the constant revolutions in methods of production themselves, from the devaluation of the existing capital which is always associated with this, and from the general competitive struggle and the need to improve production and extend its scale, merely as a means of self-preservation, and on pain of going under. The market, therefore, must be continually extended, so that its relationships and the conditions governing them assume ever more the form of a natural law independent of the producers and becomes ever more uncontrollable. The internal contradiction seeks resolution by extending the external field of production. But the more productivity develops, the more it comes into conflict with the narrow basis on which the relations of consumption rest. It is in no way a contraction, on this contradictory basis, that excess capital coexists with a growing surplus value; for although the mass of surplus-value produced would rise if these were brought together, yet this would equally heighten the contradiction between the conditions in which this surplus-value was produced and the conditions in which it was realized." (Capital Vol. 3 pp. 352-3)
"In short, all the objections raised against the obvious phenomena of overproduction (phenomena that remain quite impervious to these objections) amount to saying that the barriers to capitalist production are not barriers to production in general and are therefore also not barriers to this specific, capitalist mode of production. But the contradiction in this capitalist mode of production consists precisely in its tendency towards the absolute development of productive forces that come into continuous conflict with the specific conditions of production in which capital moves, and can alone move.
It is not that too many means of subsistence are produced in relation to the existing population. On the contrary. Too little is produced to satisfy the mass of the population in an adequate and humane way.
Nor are too many means of production produced to employ the potential working population. On the contrary. What is produced is firstly too great a section of the population which is in fact incapable of work, which owing to its situation is dependent on the exploitation of the labour of others or on kinds of work that can only count as such within a miserable mode of production. Secondly, not enough means of production are produced to allow the whole potential population to work under the most productive conditions, so that their absolute labour-time is curtailed by the mass and effectiveness of the constant capital applied during this labour time.
Periodically, however, too much is produced in the way of means of labour and means of subsistence, too much to function as means for exploiting the workers at a given rate of profit. Too many commodities are produced for the value contained in them, and the surplus-value included in this value, to be realized under the conditions of distribution given by capitalist production, and to be transformed back into new capital, i.e. it is impossible to accomplish this process without ever-recurrent explosions.
It is not that too much wealth is produced. But from time to time, too much wealth is produced in its capitalist, antagonistic forms." (Ibid pp. 366-7)
"Overproduction is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces (that is to say, to exploit the maximum amount of labour with the given amount of capital), without any consideration for the actual limits of the market or the needs backed by the ability to pay; and this is carried out through continuous expansion of reproduction and accumulation, and therefore constant reconversion of revenue into capital, while on the other hand, the mass of the producers remain tied to the average level of needs, and must remain tied to it according to the nature of capitalist production." (V. 32 pp. 163-4)
"The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses, in the face of the drive of capitalist production to develop the productive forces as if only the absolute consumption capacity of society set limit to them." (Capital III chapter 30)
As is clear from the last citation, for Marx the cause of crisis was not purely limited consumption, the limited consumption of the masses becomes a problem because society's "absolute consumption capacity" is limited and this checks the impulse to develop the productive power. The consumption of the people is limited by the capitalistic mode of production, and thus also its mode of distribution. In capitalistic development, this consumption ultimately is restricted and explodes as crisis.
"To express this contraction in the most general terms, it consists in the fact that the capitalist mode of production tends towards an absolute development of the productive forces irrespective of value and the surplus-value it contains, and even irrespective of the social relations within which the capitalist production takes place; while on the other hand its purpose is to maintain the existing capital value and to valorize it to the utmost extent possible (i.e. an ever accelerated increase in this value). In its specific character it is directed towards using the existing capital as a means for the greatest possible valorization of this value. The methods through which it attains this end involve a decline in the profit rate, the devaluation of the existing capital and the development of the productive forces of labour at the cost of the productive forces already produced.
The true barrier to capitalist production is capital itself. It is that capital and its self-valorization appear as the starting and finishing point, as the motive and purpose of production; production is production only for capital, and not the reverse, i.e. the means of production are not simply means for a steadily expanding pattern of life for the society of the producers. The barriers within which the maintenance and valorization of the capital-value has necessarily to move-and this in turn depends on the dispossession and impoverishment of the great mass of the producers-therefore come constantly into contradiction with the methods of production that capital must apply to its purpose and which set its course towards an unlimited expansion of production, to production as an end in itself, to an unrestricted development of the social productive powers of labour. The means-the unrestricted development of the forces of social production-comes into persistent conflict with the restricted end, the valorization of the existing capital. If the capitalist mode of production is therefore a historical means for the developing the material powers of production and for creating a corresponding world market, it is at the same time the constant contradiction between this historical task and the social relations of production corresponding to it." (Capital III pp. 358-9)
In capitalist society, the market does not create production, production creates the market-no matter how illogical this appears, it is nonetheless profoundly true for capitalistic production. In other words, production and the market are definitely not in agreement, and usually production exceeds the market. The market does not expand in proportion to production, or does not develop or expand as rapidly as production. This is a contradiction, but an inescapable contradiction under capitalism. Under capitalism production exceeding consumption and the market and supply exceeding demand appears as one inevitable law.
According to Marx, production usually expands rapidly. This is because, first of all, the capital invested in production always increases (capital accumulation and the transformation of capital into surplus value is the nature of capital); and secondly, through capital becoming increasingly productive. Hence, production increases rapidly, but the market does not, and cannot, expand to meet this. This does not mean that surplus value, i.e. the value exploited from the workers, is not realized (or "consumed"), but the failure of the expansion of consumption to keep pace with the expansion of production is one contradiction which at a certain stage necessitates a forced readjustment. If a certain stage of disequilibrium is reached, a violent retraction must occur.
It is absurd to ask the question why this takes a violent form under capitalistic production, and whether this is indeed necessary. In a society in which there is anarchy in production and the various internally united moments, such as value and use value, production and consumption (market), supply and demand, value and its realization, or productive capital and money capital, etc., are externally independent, and move and develop according to their own particular laws; that is, in a society penetrated by this sort of disequilibrium, a general crisis is the only means to readjust, and achieve equilibrium.
Hasn't the bourgeoisie always stressed that things can be safely left to the movement of the "market economy" and advocated its (anarchistic movement) usefulness? In that case, isn't crisis also one of the "automatic" harmonizing effects of the market economy? If they are going to praise the splendid movement of the market, they would also have to accept crisis to be consistent. It is self-contradictory to praise the harmonization and adjustment function of the market, but to be frightened by crisis which is the most sharp and decisive manifestation of this function. If one accepts the market, one must also accept crisis; if one applauds the market, one must also applaud crisis-because they are both fundamentally the same, and are both the essence of the same capitalistic mode of production. Apart from crisis, there is no other way that equilibrium can be reached in such a thorough form for the sake of capital and its continuation, those who can't understand this reveal their ignorance. One cannot only credit the market economy for fortunate circumstances without recognizing crisis as a characteristic manifestation of this market economy.
"The market expands more slowly than production; or in the cycle through which capital passes during its reproduction-a cycle in which it is not simply reproduced but reproduced on an extended scale, in which it describes not a circle but a spiral-there comes a moment at which the market manifests itself as too narrow for production. This occurs at the end of the cycle. But it merely means: the market is glutted. Overproduction is manifest. If the expansion of the market had kept pace with the expansion of production there would be no glut in the market, no overproduction. However, the mere admission that the market must expand with production, is, on the other hand, again an admission of the possibility of overproduction, for the market is limited externally in the geographical sense, the internal market is limited as compared with a market that is both internal and external, the latter in turn is limited as compared with the world market, which however is, in turn, limited at each moment of time, [though] in itself capable of expansion. The admission that the market must expand if there is to be no overproduction, is therefore also an admission that there can be overproduction. For it is then possible-since market and production are two independent factors-that the expansion of one does not correspond with the expansion of the other; that the limits of the market are not extended rapidly enough for production, or that new markets-new extensions of the market-may be rapidly outpaced by production, so that the expanded market becomes just as much a barrier as the narrower market was formerly." (MECW Volume 32 pp. 153-4)
According to Marx's view, production and consumption (market) are distinct things, and under capitalism develop and move in mutually independence and autonomy. Certainly both are united and internally connected, but one character of capitalism is that because they are also inescapably mutually independent and in opposition, at a certain stage this contradiction must explode as a crisis. Say, Mill and Ricardo said that production and consumption are simply identical; that production is consumption, and consumption is production (or sales are purchases, and supply is demand). However, the underconsumption theorists also simply contrapose production and consumption in the same manner as the equilibrium theorists. By basing their theory on an incorrect understanding (surplus value could not be realized, etc.) to offer a simplistic account of disequilibrium between production and consumption (market), and thus failing to understand the real contradiction in capitalistic production, they are more or less the same as the equilibrium theorists. They understand the contradictions of capitalism in an extremely narrow way.
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