Capital II, Chapter 21 - Part 9

Once again, we get an explanation of what Marx means by overproduction here. The accumulation of increasing money hoards, as rising quantities of surplus value are withdrawn, do not constitute overproduction of capital for Marx, though it is only this kind of overproduction, rather than the overproduction of commodities, that the bourgeois economists were prepared to admit. On the contrary, for Marx an overproduction of money-capital is something of a contradiction in terms. Money-capital is itself ephemeral. It only exists momentarily on its transformation into becoming productive-capital. Money-capital that is not immediately in the process of becoming productive-capital is not money-capital at all, but only a money hoard. It cannot, therefore, be over produced or over accumulated capital.

Capital can only be overproduced or over accumulated if it is in the form of productive-capital or commodity-capital. Commodity-capital, as Marx described earlier, is over produced where large stocks of commodities exist in the market, which cannot be sold at prices that reproduce the capital used to produce them. Productive-capital is over accumulated where it cannot employ additional labour-power that can produce absolute or relative surplus value.

However,

“Whereas the surplus-product, directly produced and appropriated by the capitalists A, A', A'' (I), is the real basis of the accumulation of capital, i.e., of extended reproduction, although it does not actually function in this capacity until it reaches the hands of B, B', B'', etc. (I), it is on the contrary absolutely unproductive in its chrysalis stage of money – as a hoard and virtual money-capital in process of gradual formation – runs parallel with the process of production in this form, but lies outside of it. It is a dead weight of capitalist production. The eagerness to utilise this surplus-value accumulating as virtual money-capital for the purpose of deriving profits or revenue from it finds its object accomplished in the credit system and "papers." Money-capital thereby gains in another form an enormous influence on the course and the stupendous development of the capitalist system of production.” (p 502)

The view that economic growth is easier, or can be more rapid where there is a lack of capital, or that capital has to be physically destroyed to bring about a more rapid growth is also demolished here by Marx.

“The surplus-product converted into virtual money-capital will grow so much more in volume, the greater was the total amount of already functioning capital whose functioning brought it into being.” (p 502)

Marx makes a similar point in Volume III of Capital, where he writes that at a certain point, a large capital grows faster with a low rate of profit than a small capital with a high rate of profit. 

"Concentration increases simultaneously, because beyond certain limits a large capital with a small rate of profit accumulates faster than a small capital with a large rate of profit."

(Capital III, Chapter 15)

Of course, were it true that economies with small capitals grow faster, then places like Upper Volta would have enjoyed stellar performance. Economies with larger existing amounts of productive capacity not only generate larger volumes of surplus value, of potential money-capital etc. but also because of that, this potential capital is more easily converted into productive-capital. Small money hoards may have to be accumulated for long periods before they reach the minimum level where they can be actually converted into productive-capital. But, a large money hoard can more easily be used to be transformed into a new machine, new factory and so on, or alternatively can be effectively separated from an existing capital to begin some new venture.

For example, large amounts of surplus value produced by Virgin from one type of activity, accumulated as a money hoard, becomes available to commence a new venture in some other industry. A small, back street business can never generate those volumes of surplus value, to accumulate money-capital, to engage in such activity. At a macro level, an economy like the US can utilise existing huge money hoards to develop whole new industries, e.g. space technology, that a small economy cannot achieve. That is why relatively small economies, like the UK, have to join larger federations, such as the EU, or face economic catastrophe.

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