Ricardo's argument is also based on James Mill's metaphysical equation of demand and supply, which is the essence of Say's Law. But, as described earlier, this equation of demand and supply is only an expression of the unity of purchase and sale, of production and consumption, which is another form of the unity of use value and exchange-value, and yet this unity, as soon as money intervenes, turns into a growing independence of the two poles, which this unity implies. As soon as money intervenes, a sale no longer implies a corresponding purchase, and production, therefore, no longer implies consumption, supply no longer entails demand. On this basis, the commodity may no longer possess use value, and hence its exchange value is destroyed along with it.
“Money is not only “the medium by which the exchange is effected” (l.c., p. 341), but at the same time the medium by which the exchange of product with product is divided into two acts, which are independent of each other, and separate in time and space. With Ricardo, however, this false conception of money is due to the fact that he concentrates exclusively on the quantitative determination of exchange-value, namely, that it is equal to a definite quantity of labour-time, forgetting on the other hand the qualitative characteristic, that individual labour must present itself as abstract, general social labour only through its alienation.” (p 504)
But, having been alienated, the product of this labour may represent a quantity of exchange-value that has been produced, but, as Marx says, in Capital III, Chapter 15, this production is only the first act in the drama. The next part is to realise that exchange-value, which depends not on the quantity of exchange-value, but on the use value, i.e. whether it can find a buyer for that use value, at a market price at least equal to the price of production. And, on that basis, its clear that, if its true that one or several commodities cannot satisfy this requirement, there is no reason why all commodities may not likewise fail to satisfy this requirement. Ricardo's argument that there can only be partial overproduction, therefore, is a poor way out.
“In the first place, if we consider only the nature of the commodity, there is nothing to prevent all commodities from being superabundant on the market, and therefore all falling below their price. We are here only concerned with the factor of crisis. That is all commodities, apart from money [may be superabundant].” (p 504)
If its possible for one commodity to be produced in quantities greater than the demand for it, at its price of production, then it is equally, theoretically possible for all commodities to be produced in quantities greater than the demand for them, at their price of 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.” (p 505)
There is a unity between production and consumption, in that there is no point in producing unless what is produced is consumed, but the intervention of money means that these two aspects of this unity are separated and become independent. Under capitalism, the producer does not produce specifically to meet the requirements of the consumer of their product, but to maximise the realisation of the surplus value embodied within those commodities. As the goal of each producer is to maximise this exchange value/surplus value, and not the consumption needs of others, each producer seeks to expand their output within the bounds of what their capital will allow, irrespective of whether there is a market for the additional output.
“The demand increases constantly, and, in anticipation of this new capital is continually invested in new land, although this varies with the circumstances for different agricultural products. It is the formation of new capitals which in itself brings this about. But so far as the individual capitalist is concerned, he measures the volume of his production by that of his available capital, to the extent that he can still control it himself. His aim is to capture as big a portion as possible of the market. Should there be any over-production, he will not take the blame upon himself, but places it upon his competitors.”
(Capital III, Chapter 39)
And, indeed, it is in times of expansion when each producer is led to accumulate faster, and to ramp up their output.
“Firstly: Crises are usually preceded by a general inflation in prices of all articles of capitalist production. All of them therefore participate in the subsequent crash and at their former prices they cause a glut in the market. The market can absorb a larger volume of commodities at falling prices, at prices which have fallen below their cost-prices, than it could absorb at their former prices. The excess of commodities is always relative; in other words it is an excess at particular prices. The prices at which the commodities are then absorbed are ruinous for the producer or merchant.
Secondly:
For a crisis (and therefore also for over-production) to be general, it suffices for it to affect the principal commercial goods.” (p 505)
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