“The greater the development of capitalist production, and, consequently, the greater the means of suddenly and permanently increasing that portion of constant capital consisting of machinery, etc., and the more rapid the accumulation (particularly in times of prosperity), so much greater the relative over-production of machinery and other fixed capital, so much more frequent the relative under-production of vegetable and animal raw materials, and so much more pronounced the previously described rise of their prices and the attendant reaction. And so much more frequent are the convulsions caused as they are by the violent price fluctuations of one of the main elements in the process of reproduction.” (p 118-9)
But, as I have set out elsewhere in relation to the progress of the long wave, these high prices ultimately bring about additional supply. Existing producers will have expanded their production, new firms, new mines, quarries, and farms will have been established, often with lower marginal costs of production. Supply expands rapidly, often at the point where very high prices have caused demand to slacken, and when the growth that prompted the initial increase in demand has slowed. Then prices of raw materials can fall sharply.
The sudden collapse of raw material prices will tend to favour the traditional producers of these commodities, which enjoy more favourable conditions of production. This has been the case most markedly recently, in relation to oil.
“True, due to the impetus it has had, reproduction of raw material proceeds on an extended scale, especially in those countries which more or less possess a monopoly of this production. But the basis on which production carries on after the extension of machinery, etc., and which, after some fluctuations, is to serve as the new normal basis, the new point of departure, is very much extended by the developments in the preceding cycle of turnover. In the meantime, the barely increased reproduction again experiences considerable impediments in some of the secondary sources of supply.” (p 119)
When the prices of materials are high, the manufacturers form associations to regulate production. These associations also try to stimulate production in the supplying countries. But, as soon as prices fall, competition to simply buy in the cheapest market reasserts itself.
“All thought of a common, all-embracing and far-sighted control of the production of raw materials gives way once more to the faith that demand and supply will mutually regulate one another. And it must be admitted that such control is on the whole irreconcilable with the laws of capitalist production, and remains for ever a pious wish, or is limited to exceptional co-operation in times of great stress and confusion.” (p 120)
But, as Engels notes, this was written in 1865, and already in the following 30 years things had changed considerably. The kind of private capital that Marx is describing here, had already been replaced by the kind of collective, socialised capital, whose development is a transitional form towards Socialism, Marx had previously described in Volume I, and goes on to describe, more fully, later, in Volume III. Alongside the abolition of the monopoly of private capital, the expropriation of the expropriators, as Marx described it in Volume I, had also gone the kind of planlessness described above.
As Engels puts it in his Critique of the Erfurt Programme, where .
“Paragraph 4. 'The planlessness rooted in the nature of capitalist private production' needs considerable improvement. I am familiar with capitalist production as a social form, or an economic phase; capitalist private production being a phenomenon which in one form or another is encountered in that phase. What is capitalist private production? Production by separate entrepreneurs, which is increasingly becoming an exception. Capitalist production by joint-stock companies is no longer private production but production on behalf of many associated people. And when we pass on from joint-stock companies to trusts, which dominate and monopolise whole branches of industry, this puts an end not only to private production but also to planlessness.”
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