Sunday, 12 August 2018

Theories of Surplus Value, Part II, Chapter 17 - Part 45

[9. Ricardo’s Wrong Conception of the Relation Between Production and Consumption under the Conditions of Capitalism] 

Ricardo, by seeing the object of production being consumption, and thereby the production of use values, thereby also conflates the concept of demand with the concept of need. Having done so, he prevents himself from recognising the basis of overproduction, because he notes that although the need for this or that commodity may be satisfied that is never the case for all commodities, and, in any case, new needs, in the shape of new commodities, are continually being created. A variation of this can be seen in the UK in relation to the housing market. The argument is presented that the price of houses is high, because the demand exceeds the supply. The basis of the demand we are told is a rising population, and so on. Yet, the fact is that the percentage of home ownership is falling. The reason is that whilst the need for housing may (or may not) be rising, the demand for housing, at the current market prices, is falling. The demand is falling precisely because people may need, or just want a house, but they cannot turn it into effective demand unless they have the money to buy a house at the current market prices, despite mortgages having been made artificially cheap, and other state subsidies to purchase having been provided at an unprecedented level. 

And, this lack of effective demand at current prices is not the only reason for the proportion of home owners falling, it is also the reason that builders are building fewer houses than almost ever. A house builder will not build houses if they do not think they will be able to sell them at a price that gives them a profit. So, builders are only building the number of houses they know they can sell at the current elevated prices. Its why its almost impossible to buy a new house from a large builder other than off plan.  If they build more, they will not sell other than at lower prices, at which they will make losses, given the current high land prices, which inflate their costs.  And, demand for houses from landlords is only being maintained, because the private buyers who can no longer afford to buy their own home, are then forced into renting, and in order for them even to pay the massively inflated rents, the state has to provide £9 billion a year in Housing Benefit subsidies that go into the landlords' pockets! 

Ricardo writes, 

““Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities; the demand for corn is limited by the mouths which are to eat it, for shoes and coats by the persons who are to wear them; but though a community, or a part of a community, may have as much corn, and as many hats and shoes, as it is able or may wish to consume, the same cannot be said of every commodity produced by nature or by art. Some would consume more wine, if they had the ability to procure it. Others having enough of wine, would wish to increase the quantity or improve the quality of their furniture. Others might wish to ornament their grounds, or to enlarge their houses. The wish to do all or some of these is implanted in every man’s breast; nothing is required but the means, and nothing can afford the means, but an increase of production” (l.c., pp. 341-42).” (p 505-6) 

The logic of Ricardo's position, Marx says, is to say that the overproduction in one sphere is only the result of underproduction in another, which thereby results in underconsumption. If workers are then under consuming it is because they are under producing. The answer is then to produce, and then they can exchange this production for all those commodities they need. But, in that case, he may as well just say that if workers are in need of corn and clothes they should simply produce the corn and clothes they need. Why produce, say, machines only then to exchange the machines for corn and clothes. 

The suggestion is, of course, nonsensical because it again abstracts from the reality of capitalist production. The workers, under capitalism, cannot simply produce the corn or clothes they need, or produce machines they do not need, in exchange for the corn and clothes they do need, because they do not own their means of production. In order to produce anything, the workers have to obtain the permission of the capitalists to use the means of production. The capitalist will only employ the workers, and allow them to use the means of production, if the workers will produce for them commodities that can be sold at a profit. But, it is precisely this condition which is missing during a crisis. Large quantities of commodities then cannot be sold at a profit, and so capital has no reason to employ workers to produce even more commodities, which would then be sold at even greater loss. 

“In periods of over-production, a large part of the nation (especially the working class) is less well provided than ever with corn, shoes etc., not to speak of wine and furniture. If over-production could only occur when all the members of a nation had satisfied even their most urgent needs, there could never, in the history of bourgeois society up to now, have been a state of general over-production or even of partial over-production. When, for instance, the market is glutted by shoes or calicoes or wines or colonial products, does this perhaps mean that four-sixths of the nation have more than satisfied their needs in shoes, calicoes etc.? What after all has over-production to do with absolute needs? It is only concerned with demand that is backed by ability to pay. It is not a question of absolute over-production—over-production as such in relation to the absolute need or the desire to possess commodities. In this sense there is neither partial nor general over-production; and the one is not opposed to the other.” (p 506)

The irony is that workers have indeed produced all of these commodities, many of which they themselves need in even greater quantity. What is more, as Marx describes in Capital III, Chapter 15, not only will they have produced them, but, in doing so, they will also have produced large amounts of surplus value, i.e. the new value they thereby create with their labour is much greater than the value of their labour-power. But, as Marx sets out, this first act, the production of value and surplus value is only the start. The value and surplus value must be realised via the sale of the commodity at its price of production

“If this is not done, or done only in part, or only at prices below the prices of production, the labourer has been indeed exploited, but his exploitation is not realised as such for the capitalist, and this can be bound up with a total or partial failure to realise the surplus-value pressed out of him, indeed even with the partial or total loss of the capital. The conditions of direct exploitation, and those of realising it, are not identical. They diverge not only in place and time, but also logically. The first are only limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society. But this last-named is not determined either by the absolute productive power, or by the absolute consumer power, but by the consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce surplus-value on an extended scale. This is law for capitalist production, imposed by incessant revolutions in the methods of production themselves, by the depreciation of existing capital always bound up with them, by the general competitive struggle and the need to improve production and expand its scale merely as a means of self-preservation and under penalty of ruin. The market must, therefore, be continually extended, so that its interrelations and the conditions regulating them assume more and more the form of a natural law working independently of the producer, and become ever more uncontrollable. This internal contradiction seeks to resolve itself through expansion of the outlying field of production. But the more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest. It is no contradiction at all on this self-contradictory basis that there should be an excess of capital simultaneously with a growing surplus of population. For while a combination of these two would, indeed, increase the mass of produced surplus-value, it would at the same time intensify the contradiction between the conditions under which this surplus-value is produced and those under which it is realised.” 

(Capital III, Chapter 15) 

The reason that this may not happen is varied, as previously set out. But, as Marx also sets out, in Capital III, Chapter 15, the fact is that producers and consumers are not coterminous, and consumers themselves divide into not only workers and capitalists, but workers, capitalists, landlords, rentiers, and even amongst the workers there are variations in wealth and income, as well as within the ranks of the middle class. 

For any commodity, or set of commodities, certain sections of consumers may have satisfied their needs, and be able but unwilling to buy more, unless prices fall significantly, whilst workers may be willing but unable to buy any of these commodities unless the price falls significantly. Yet, at this much lower price, it may be impossible to produce a profit. 

“It cannot be said here that they should produce things in order to obtain them, for they have produced them and yet they have not got them. Nor can it be said that a particular commodity gluts the market, because no one is in want of it. If, therefore, it is even impossible to explain that partial over-production arises because the demand for the commodities that glut the market has been more than satisfied, it is quite impossible to explain away universal over-production by declaring that needs, unsatisfied needs, exist for many of the commodities which are on the market.” (p 507) 

The problem, Marx says, resides precisely in the failure to be able to convert the value that has already been produced by the workers, and so the surplus value along with it, into money, by the sale of the commodity. Once that is done, the possibility of overproduction disappears with it, because there can be no overproduction of money, or money-capital. Money-capital is only money-capital in so far as it is used to be metamorphosed into productive-capital. But, it is always only ever potential money-capital. Either it is used in this way, in which case, in that instant, it ceases being money-capital, and becomes money in the hands of the sellers of the means of production and labour-power, or it is not used in that way, and so never becomes money-capital. Instead it may be hoarded, or used for personal consumption or financial speculation and other forms of gambling. 

The problem of overproduction only arises at the point whereby the commodity-capital must be metamorphosed into this potential money-capital. 

“So long as reproduction continued uninterruptedly—and therefore also the phase of this reproduction in which the product existing as a saleable commodity, the calico, was reconverted into money, at its value—so long, shall we say, the workers who produced the calico, also consumed a part of it, and with the expansion of reproduction, that is to say, with accumulation, they were consuming more of it, or also more workers were employed in the production of calico, who also consumed part of it.” (p 507) 

It is when this breaks down, when it cannot be metamorphosed into money-capital that the problem arises, because then the workers cannot be re-employed, the means of production cannot be replaced and so on. 

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