Some Marxist economists, in seeking to deny the possibility of under-consumption, have adopted a similar argument to that put forward by Ricardo. In other words, they say a crisis cannot arise because of under-consumption by workers, because the surplus production not consumed by workers can instead be consumed by capitalists themselves. For the reasons Marx sets out against Ricardo, here, and he makes a similar point in Capital III, Chapter 15, this argument is nonsense. No capitalist produces in order to consume. If they did, then crises could indeed be avoided, by each individual capitalist personally consuming their surplus product, or that part of their surplus product that cannot be sold at its price of production. Nor is that situation changed, therefore, by requiring as the Keynesians suggest, that capitalists do collectively, as a class, what none of them do as individuals. That essentially is no different, as will be seen in Part III, to the solution put forward by Malthus, who, as representative of the old landed aristocracy, proposed that the capitalists get on with producing, and accumulating, whilst leaving the landlord class, and the state, to soak up the surplus production via its unproductive consumption.
The rush to make this essentially Ricardian argument, stems from a desire to deny the possibility of a crisis arising from underconsumption, and thereby to avoid being labelled a Keynesian underconsumptionist. But, the fact is that Marx never denied the possibility of such a crisis. His argument was against those who denied the possibility of overproduction, and who sought to explain crises of overproduction as being rather due to underconsumption. Moreover, Marx's argument against these underconsumptionists was framed in the context of a global market crisis, in which the underconsumption was taken as being the underconsumption of one or more nations, for example China, not as Keynesians frame the argument as being underconsumption within the context of a national economy. The underconsumption is taken as arising from underproduction of other commodities to be exchanged for those that have been overproduced.
The idea that the individual capitalist, or the capitalist class collectively, could simply consume the surplus product they cannot sell, denies the very nature of capitalism itself.
“The first part of the alternative is nonsense. The second as well. A man who has produced, does not have the choice of selling or not selling. He must sell. In the crisis there arises the very situation in which he cannot sell or can only sell below the cost-price or must even sell at a positive loss. What difference does it make, therefore, to him or to us that he has produced in order to sell? The very question we want to solve is what has thwarted this good intention of his?” (p 503)
Remember here that when Marx refers, in Theories of Surplus Value to “cost price” he means price of production. In other words, the point here is that capitalist producers produce to sell not to consume. Having produced, they must sell, but, unless they can sell at a sufficiently high price, they will not achieve the price of production, and if the market price is even lower, they will make a loss, so that the value of the capital consumed in production cannot be reproduced. And, why might this price be so low? In practice, for many reasons.
Sinclair produced the C-5 in the expectation of selling it at a profit. In practice, it did not constitute a use value, for enough consumers, at its price of production, to do so. The excess supply, over demand, could then only be sold at market prices below the price of production. But, in fact, it is not just the excess supply that is sold at this price, but the whole supply. The price of all the units, thrown on to the market has to fall, so that demand is raised to absorb the supply. Each unit is then sold at a loss. If the supply of a commodity rises sharply, because of some revolution in technology, the value and price of production, will fall, as a result, but, if the increase in demand does not rise in at least the same proportion as the increase in supply, then the market price will fall below the price of production.
Marx gives numerous examples of that. The example he gives in relation to an increase in the supply of knives, has already been mentioned, but he also gives an actual example of an increase in the supply of yarn, resulting from the introduction of new spinning machines.
“When spinning-machines were invented, there was over-production of yarn in relation to weaving. This disproportion disappeared when mechanical looms were introduced into weaving.” (Note *, p 521)
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