Wednesday, 27 June 2018

Theories of Surplus Value, Part II, Chapter 16 - Part 34

Not only does Ricardo overlook the point made earlier that the market for commodities is made up not just of capitalists and workers, but also of other classes, he also fails to take into account, despite his earlier comment, in respect of crises and fixed capital, that once production becomes based upon this large-scale machine industry, other regulations come into play that govern minimum efficient levels of output etc. 

“... he overlooks that in reality, where not only the capitalist confronts the workman, but capitalist, workman, landlord, moneyed interest, [people receiving] fixed incomes from the state etc., confront one another, the fall in the prices of commodities which hits both the industrial capitalist and the workman, benefits the other classes. 

Secondly he overlooks that the output level is by no means arbitrarily chosen, but the more capitalist production develops, the more it is forced to produce on a scale which has nothing to do with the immediate demand but depends on a constant expansion of the world market. He has recourse to Say’s trite assumption, that the capitalist produces not for the sake of profit, surplus-value, but produces use-value directly for consumption— for his own consumption. He overlooks the fact that the commodity has to be converted into money. The demand of the workers does not suffice, since profit arises precisely from the fact that the demand of the workers is smaller than the value of their product, and that it [profit] is all the greater the smaller, relatively, is this demand. The demand of the capitalists among themselves is equally insufficient. Over-production does not call forth a constant fall in profit, but periodic over-production recurs constantly. It is followed by periods of under-production etc. Over-production arises precisely from the fact that the mass of the people can never consume more than the average quantity of necessaries, that their consumption therefore does not grow correspondingly with the productivity of labour.” (p 468) 

And this, as Marx and Engels repeat in numerous places, is the key to understanding the crisis of overproduction, and why, despite 400 years of developing capitalist production, from the 15th century on, it is only in 1825, when large-scale machine industry has taken hold, that the first crisis of overproduction arises. In all petty commodity production and capitalist handicraft industry, the four potential causes of crisis, identified by Marx exist. That is that the commodity itself is both use value and exchange value; production and consumption are separated; money acts as both means of circulation and means of payment; and the potential for a disproportion in supply of different commodities arises. Yet, crises of overproduction do not arise in these earlier forms of capitalism, and commodity production. 

The reason is that, even in terms of capitalist manufacture, i.e. production based essentially on handicraft production, rather than machine production, output expands only more or less in line with the expansion of the population, and so of the market. Machine production changed all that. The machines themselves are continually revolutionised, output rises by multiples overnight, and the production itself can only be justified by being undertaken on a huge scale, which must be continuous, and must be ahead of consumption. The potential of crisis, resulting from the separation of production and consumption, becomes the inevitability of crisis once the production expands so much faster than the market that the output, having been produced, cannot find buyers at prices that cover the cost of production. As production expands, more workers are employed, the demand for labour-power begins to exceed the supply, so wages rise, and profits are squeezed. The workers, with their higher wages, consume more of the mass produced products, but that only means that their demand for these commodities becomes more quickly sated. They could buy more, but have no desire to do so. 

As Marx puts it, 

“Say’s earth-shaking discovery that “commodities can only be bought with commodities” simply means that money is itself the converted form of the commodity. It does not prove by any means that because I can buy only with commodities, I can buy with my commodity, or that my purchasing power is related to the quantity of commodities I produce. The same value can be embodied in very different quantities [of commodities]. But the use-value—consumption—depends not on value, but on the quantity. It is quite unintelligible why I should buy six knives because I can get them for the same price that I previously paid for one.” 

As a result, unless there are a wide range of new commodities available for workers to buy, at prices they are willing to pay, they simply take their money wages, from the sale of their labour-power, and hold on to it. As Marx puts it in his response to Say's Law

“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, Chapter 17, p 505) 

And, it is not just workers in this position. As the market prices of these commodities are driven down, the cheaper they become for the landlord or money lender, relative to their rent and interest payments, and so the more quickly is their own demand sated, whilst this also represents a transfer of surplus value from capital to the landlord and money lender. 

I have set out these arguments in much more detail in my book – Marx and Engels' Theories of Crisis. 

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