The Abstract Theory Of Crises (4)
The Separation Of Production and Consumption – cont'd
The separation of production and consumption then can create the potential for crisis because sale does not necessarily imply purchase, supply does not create demand; commodities may not find a buyer, or only at prices that do not reproduce the capital consumed in their production; on the other hand, producers may not find the constant capital they require, or else only at prices that would reduce demand to a level below the minimum efficient level for production.
“Further: since the circulation process of capital is not completed in one day but extends over a fairly long period until the capital returns to its original form, since this period coincides with the period within which market-prices equalise with cost-prices, and great upheavals and changes take place in the market in the course of this period, since great changes take place in the productivity of labour and therefore also in the real value of commodities, it is quite clear, that between the starting-point, the prerequisite capital, and the time of its return at the end of one of these periods, great catastrophes must occur and elements of crisis must have gathered and develop, and these cannot in any way be dismissed by the pitiful proposition that products exchange for products.” (TOSV2 p 495)
Engels points out in Capital that this was a greater problem when commodities took a much longer time to go to and from the main markets in the US and India. This problem is lessened the more transport is improved and the circulation time of commodities is reduced. However, one of the means of reducing circulation time – the use of credit – creates a similar problem.
“...a man may be very pleased, if he has sold his commodities without immediately thinking of a purchase. On the other hand, if the value that has been realised is again to be used as capital, it must go through the process of reproduction, that is, it must be exchanged for labour and commodities. But the crisis is precisely the phase of disturbance and interruption of the process of reproduction. And this disturbance cannot be explained by the fact that it does not occur in those times when there is no crisis. There is no doubt that no one “will continually produce a commodity for which there is no demand” (l.c., p. 340), but no one is talking about such an absurd hypothesis. Nor has it anything to do with the problem. The immediate purpose of capitalist production is not “the possession of other goods”, but the appropriation of value, of money, of abstract wealth.” (TOSV2 p 503)
But, this potential for crisis based upon commodity-production and the separation of production and consumption is exacerbated when we consider commodity-production on the basis of capitalist production, and the previously mentioned contradiction between the exchange value and use value inherent within the commodity.
Commodities have to be produced in vast quantities in order that individual enterprises can obtain economies of scale, and thereby minimise the individual value of their own production. But, there is no reason why the massive amount of production should find adequate demand for it in the market. Supply does not create its own demand.
The bourgeois economists denied that such overproduction of commodities could occur, or argued that only partial over production of commodities was possible.
“That only particular commodities, and not all kinds of commodities, can form 'a glut in the market' and that therefore over-production can always only be partial, is a poor way out. In the first place, if we consider only the nature of the commodity, there is nothing to prevent all commodities from being superabundant on the market, and therefore all falling below their price. We are here only concerned with the factor of crisis. That is all commodities, apart from money [may be superabundant]. [The proposition] the commodity must be converted into money, only means that: all commodities must do so. And just as the difficulty of undergoing this metamorphosis exists for an individual commodity, so it can exist for all commodities. The general nature of the metamorphosis of commodities—which includes the separation of purchase and sale just as it does their unity—instead of excluding the possibility of a general glut, on the contrary, contains the possibility of a general glut.” (TOSV2 p 504)
By falling under its price, Marx means below its value or price of production.
“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.” (TOSV2 p 505)
Oddly, today some Marxist economists also deny the possibility of such a glut, believing that such a proposition commits one to an underconsumptionist view. But, the proposition that markets can be glutted does not at all commit you to the view that this glut is caused by under consumption. On the contrary, markets can be glutted even as demand and consumption are rising. It only commits one to the view that output has risen even faster.