Thursday, 18 May 2017

Theories of Surplus Value, Part I, Chapter 4 - Part 73

But, Marx says, the assertion of Say and others that there can be no overproduction, but only under-consumption, or what is the same under production of other commodities, does not follow either.
“... that if A cannot sell his linen or can only sell it under its price—that is, the part of his linen which he wishes to consume himself as revenue—then this happens because B, C, etc., have produced too little wheat, meat, etc. It may be because they have not produced enough of these. But it may also be because A has produced too much linen. For assuming that B, C, etc., have enough wheat, etc., to buy all A’s linen, they nevertheless do not buy it, because only a definite quantity of linen is consumed by them.” (p 234)

In other words, this is the situation described earlier. My production of linen may increase, as may your production of fish, and they may increase in the same proportion, so that we could continue to trade. Yet, the fact that we could do so, does not mean that we will. Suppose previously that I produced 10 fish, and you produced 10 metres of line, and now we both double our production. We could continue to trade, but there is no reason why we will. Just as I only have a demand for 5 fish, and so exchange the other 5 with you for 5 metres of cloth, it may be the case that you have no demand for more than 5 fish either. So, although I may be happy to take as much linen off you as you can produce, you do not feel the same way about my fish.

The reason you do not exchange your linen for my fish has nothing to do with your underproduction of linen, you have produced enough to buy all my fish, and so is not a consequence of under-consumption of fish on your part, but is a consequence of overproduction of fish on my part. Had I spent half my time catching rabbits rather than fish, you may have been happy to exchange half of your linen for half of my fish and rabbits, leaving us both to consume the other half of our production ourselves. 

In the 19th century, when Britain increased its output of textiles and other commodities massively, this situation arose, as it continued to ship these commodities to China and other overseas markets, in ever rising quantities. But, as with the above example, these overseas markets only had a demand for a given amount of these commodities. When, therefore, these markets became glutted as a consequence of this overproduction, British economists, basing themselves on Say's Law, insisted that this could not be the result of overproduction in Britain, but was rather the consequence of under-consumption by China and other countries.

They insisted that the problem was that China and these other countries were not producing enough of the various commodities that Britain required, which could then be exchanged for the British commodities that were glutting their markets. So, Marx says, here, that such a crisis may arise because of under-consumption, but it can also be a consequence of overproduction.

“Or it may also be because A has produced more linen than the part of their revenue which can be spent on clothing materials altogether—that is, absolutely, because each person can expend as revenue only a definite quantity of his own product, and A’s production of linen presupposes a greater amount of revenue than in total there is.” (p 234)

In other words, there may be a balance between the value of consumable commodities on the market, and the amount of revenue available to buy them, but it doesn't mean that the consumable products have been produced in the proportions required to meet demand.

“It is ridiculous, however, when it is only a matter of the exchange of revenue against revenue, to suppose that what is wanted is not the use-value of the product but the quantity of this use-value, thus once again forgetting that this exchange concerns only the satisfaction of needs, not, as in exchange-value, the quantity.” (p 234)

In other words, as stated previously, just because now I exchange my 5 fish for your 5 metres of linen, it does not at all mean that even if the value of fish and linen remains constant, that I will be able to exchange 10 fish for your 10 metres of linen, because I may be happy to take whatever additional linen you can produce, whilst you will take no more fish.

Of course, everyone will prefer to have more of something than less, but the point is that beyond a certain point, every use value ceases being a use value for its owner. There is only any point in producing more of it, if additional consumers of it can be found, or if existing consumers can be persuaded to consume more.

In other words, for each commodity there is diminishing marginal utility. The more of some commodity I have, the less utility I obtain from each additional unit of it. As Marx says, if this were not the case no problem of overproduction could ever arise.

If I am a producer of fish, however much I produced, I would just consume it myself, and the same for the producer of linen.

“Why does he at all transform his revenue from the form of linen into other forms? Because he has to satisfy other needs than the need for linen. Why does he himself consume only a certain part of the linen? Because only a quantitatively determined part of the linen has use-value for him.” (p 234)

But, if the producer of linen only requires a certain quantity of linen, the producer of fish may also only require a certain quantity of linen, and the same for the producers of a range of other commodities, so that, even though the production of all these other commodities may increase, there is absolutely no reason why this will result in a proportional rise in their demand for linen. 

Indeed, it may be that if the production of wine increases, the wine producers may prefer to consume this additional wine themselves, rather than exchange it for linen. So, the inability to sell the increased linen production cannot then be placed at the door of a failure to increase wine production sufficiently, i.e. under-consumption of linen by wine producers.

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