“Ultimately, the depreciation of the elements of constant capital would itself tend to raise the rate of profit. The mass of employed constant capital would have increased in relation to variable, but its value could have fallen. The ensuing stagnation of production would have prepared — within capitalistic limits — a subsequent expansion of production.
And thus the cycle would run its course anew. Part of the capital, depreciated by its functional stagnation, would recover its old value. For the rest, the same vicious circle would be described once more under expanded conditions of production, with an expanded market and increased productive forces.” (p 255)
In fact, its not just these new machines introduced during this period of stagnation that provides the basis for the expansion. The reason for the stagnation arising is that the existing range of commodities suffer from all the problems previously outlined. The huge expansion of their production reduces the profit margin on each commodity unit to a minimum; the same cause results in the market for such commodities becoming saturated at the market value, so that consumer resistance causes market prices to fall below market values, and even below cost prices.
During the Winter phase, of the long wave, the same drive for innovation to reduce production costs, also results in innovations that create new base technologies that form the foundation of the next generation of consumption goods. These “new lines” of production are themselves, as Marx points out, characterised by low organic compositions of capital, and very high levels of profit. Because of their low organic composition of capital, any given quantity of capital released from within the total social capital, absorbs a disproportionately large quantity of labour-power. The high profits in these industries also facilitate more rapid organic growth. Finally, because these industries are producing new ranges of commodities, for which there are whole new developing and rapidly growing markets, they do not face the problem of realising produced surplus value. In fact, as production of these commodities develops, and their price of production falls, demand often outstrips supply, pushing market prices higher than market values.
Marx points out, however, that this most extreme depiction of absolute overproduction – which never arises in reality – is not an overproduction in the sense that too much was produced in the way it was described earlier, when Robinson Crusoe produced a fishing net he could not use, or produced more fish than he could eat, or expanded his stock so much that he had to spend a disproportionate amount of time tending it, and maintaining his pens.
“It is over-production of means of production only in so far as the latter serve as capital, and consequently include a self-expansion of value, must produce an additional value in proportion to the increased mass.” (p 255)
This is not like the overproduction of a peasant community, as a result of a good harvest, which celebrates its good fortune by organising a feast. The overproduction of capitalism, of course, could be so used. Its not that the overproduction signifies that everyone within the society has had all their needs satisfied. Far from it. Only that those who had the means to buy what was on offer, at prices that enabled the suppliers to make a profit, chose not to buy more at those prices. It would always be possible to sell more at lower prices, but at those lower prices profits would not be made. In that case, the capital that produced those commodities would not have acted as capital, in the way just described. In the end, the crisis forces capital to do that anyway. The mass of commodities it could not sell at those prices, in the end, get sold at much lower prices, and its on that basis that the capital that produced them gets devalued.
Capital, like the peasant community, could have taken this surplus production and distributed it for free. But, then the capital that produced all of these commodities would not have acted as capital either. It would have produced no surplus value. The point about capitalist production compared to the production of the peasant community is that the latter produced to meet its needs, but capital only produces in order to realise surplus value.
“Yet it would still be over-production, because capital would be unable to exploit labour to the degree required by a "sound", "normal" development of the process of capitalist production, to a degree which would at least increase the mass of profit along with the growing mass of the employed capital; to a degree which would, therefore, prevent the rate of profit from falling as much as the capital grows, or even more rapidly.
Over-production of capital is never anything more than over-production of means of production — of means of labour and necessities of life — which may serve as capital, i.e., may serve to exploit labour at a given degree of exploitation; a fall in the intensity of exploitation below a certain point, however, calls forth disturbances, and stoppages in the capitalist production process, crises, and destruction of capital.” (p 255-6)
The same applies on the other side of this equation. More of what has been produced could have been consumed, if more workers were employed, who thereby had wages to spend to buy them. But, the overproduction of capital was signified already by the fact that so many workers had been employed that wages had been pushed up, the rate of surplus value had been reduced to an extent that any further expansion of capital would result in no additional surplus value. If additional workers were taken on, so that they had wages to spend, this would only compound the problem for two reasons. Firstly, this additional demand for labour-power would push wages even higher, and the rate of surplus value lower, and secondly, these additional workers would produce additional commodities to be thrown on to the market to join those already overproduced.
Consequently, the process, which leads to overproduction is itself necessarily contradictory. The rise in social productivity, causes high rates and masses of profits, which leads to exuberance and expansion of production without thought as to whether the market can absorb the use values thrown on to it. At the same time, even as the proportion of labour falls, relative to the material processed, and profit margins fall, the mass of labour employed rises, and wages rise causing the rate of surplus value to fall, so that the mass of surplus value stops rising, which causes the rate of profit to drop sharply.
At the same time, the rise in social productivity, on the one hand, results in a release of capital, and on the other results in a release of workers. At the point where overproduction arises, either existing workers are laid off or new workers are not taken on. Unless the released capital is used to employ the released workers, then there will be unemployed capital on the one side, and unemployed workers on the other. That will depend upon whether new industries, new use values, can be created, which can absorb this released capital, and the released workers. But, under capitalism, because it is unplanned, the matching up of the two does not occur smoothly. It only proceeds via crises.
“It is no contradiction that this over-production of capital is accompanied by more or less considerable relative over-population. The circumstances which increased the productiveness of labour, augmented the mass of produced commodities, expanded markets, accelerated accumulation of capital both in terms of its mass and its value, and lowered the rate of profit — these same circumstances have also created, and continuously create, a relative overpopulation, an over-population of labourers not employed by the surplus-capital owing to the low degree of exploitation at which alone they could be employed, or at least owing to the low rate of profit which they would yield at the given degree of exploitation.” (p 256)
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