Capital III, Chapter 15 - Part 37

Marx then turns to the arguments of Ricardo, Mill, and Say in respect of overproduction, though without mentioning them. It is a précis of the argument he presents against them in his analysis of crises in Theories of Surplus Value II. Say's Law, actually developed by James Mill, argued that there could be no overproduction because supply creates its own demand. Every sale is at the same time a purchase. But, in the above analysis in TOSV2, Marx says, that this is only true under a system of barter. With the introduction of money, and the separation of production and consumption, A can buy B's production with £10 of money, but there is no need for B to spend that £10, buying A's production. In that case, B can keep their £10, whilst A is left with £10's worth of production they cannot sell. They have over produced these commodities.

All that is required for a general overproduction, therefore, Marx says, is that people prefer to hold on to the money they have received from the previous sale of their own commodities, rather than to spend this money, buying other's 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)

But, Mill and Ricardo argued that the only reason commodities would not be sold in the market was because potential buyers were themselves not producing enough commodities of their own to exchange with them. So, British goods had not been overproduced, causing them to lie unsold on Chinese and Indian markets, it was Chinese and Indian producers who were not producing enough commodities of their own to sell to Britain in exchange for them. Britain was not overproducing, it was China and India that were underconsuming, argued Mill and Ricardo.

The same economists, in arguing against the idea that there could be such a general overproduction, argued that any overproduction could only be an overproduction of capital, not of commodities. But, Marx points out capital is made up of commodities, so any overproduction of capital is necessarily an overproduction of commodities.

The basis of capitalism is mass production. It can only develop when markets are of a minimum size, because without that it is simply not economical to produce on a capitalist basis. But, once established, it is the technical basis of capitalism, as mass production, which determined the quantity to be produced. If a new glass furnace can only be run efficiently by churning out 100 kilos of glassware per day, then that is what the factory will produce. By producing only say 80 kilos per day, the firm would lose 20% of the efficiency of the new furnace, and the only reason for introducing it, was its greater efficiency. It must produce the 100 kilos, and then deal with the question of securing a place in the market for it.

But, it is precisely because each firm is driven on this basis to expand its production that markets become overstocked. Simply because other commodity owners, be they capitalists or workers who have sold their labour-power, have obtained money from the sale of those commodities – say to the glass maker - is no reason, as Marx describes, why they will then reciprocate by handing all this money back to the glass maker for all the glassware they bring to market. As with the example Marx gave previously in relation to the demand for knives, they only have so much requirement for glassware, and that requirement is totally unrelated to how much glassware the glass maker brings to market.

No doubt, they might buy more of it, if the price were lower, but then the glass maker would make no profit, and he produces the glass to make a profit not to satisfy consumers needs.

“The same occurs when there is an over-production of commodities, when markets are overstocked. Since the aim of capital is not to minister to certain wants, but to produce profit, and since it accomplishes this purpose by methods which adapt the mass of production to the scale of production, not vice versa, a rift must continually ensue between the limited dimensions of consumption under capitalism and a production which forever tends to exceed this immanent barrier.” (p 256)

“It amounts furthermore to demanding that countries in which capitalist production is not developed, should consume and produce at a rate which suits the countries with capitalist production.” (p 257)

It doesn't matter whether these overstocked markets are for consumer goods like glassware, or for producer goods, like machines, or material. The yarn bought by a weaver, comprises part of his constant capital. It also forms the commodity-capital of the spinner. But yarn is sold neither as commodity-capital nor productive-capital, but as a commodity. What the spinner sends to market is not commodity-capital, but the commodity yarn. When the weaver buys the yarn, in the market place, it could as easily have been the same commodity produced by a slave producer, or a peasant producer, and so never any form of capital whatsoever, as Marx describes in Capital II. The weaver does not buy the yarn as productive-capital, but only as a commodity. It is only after having bought it, and in advancing it to production that it constitutes for him productive-capital.

So, if yarn lies unsold in the market it is overproduced as a commodity. It is the means of production used in it that were the overproduced capital, because they could not validate themselves via the process of reproduction.

“Furthermore, capital consists of commodities, and therefore over-production of capital implies over-production of commodities. Hence the peculiar phenomenon of economists who deny over-production of commodities, admitting over-production of capital.” (p 256)

It can't be argued either that this overproduction is just a matter of disproportion between different branches of production. Capitalist production is not production based on some co-ordinated plan. To the extent that all production within the economy does ever form any such proportion, it is only ever accidental, and the result of continual adjustments via the price mechanism of numerous disproportions between demand and supply.

As Marx described in Capital II, the process of expanded reproduction of capital itself demands disproportion between Department I and II; it requires that resources be diverted from consumption to accumulation so that both consumption goods and producer goods can be produced on an expanded scale. And, as he sets out there, even with simple reproduction, it only requires that Department II capitalists simply delay the replacement of their fixed capital for this under-consumption on their part to result in an overproduction by Department I capitalists.

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