This partial overproduction and underproduction has already been discussed in Capital II, in relation to the replacement of fixed capital, and has been referred to earlier in this work. The disproportion may then result in an overproduction of fixed capital, and under production of circulating constant capital, or vice versa.
“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)
What is it that means that the yarn here is overproduced? The fact of the introduction of the spinning machines after all ensures that this yarn is produced with much less socially necessary labour than was previously the case, so that its value is considerably reduced. And, this revolution in productivity means that the annual rate of profit rises in yarn production, because the working-period is significantly reduced, so that the rate of turnover rises. The rate of profit/profit margin falls, because the volume of output rises significantly, so that the profit per unit is reduced, but that does not change the fact that the mass of surplus value produced rises significantly.
However, as seen previously, what constitutes socially necessary labour is not only a matter of production being undertaken by at least the average level of efficiency. The labour-time expended is only socially necessary if there is a demand for that level of output, at the market value. In other words, 1,000 kilos of yarn may be produced by the most efficient means possible, and having a market value of £1 per kilo, but, if there is only demand for 800 kilos of yarn at a market value of £1 per kilo, it will still mean that 200 kilos have been overproduced, that the labour-time involved in their production was not socially necessary.
In that case, it's clear that a disproportion arises here. In fact, this disproportion is no different than that seen in another context. The formation of an average rate of profit and development of prices of production represents exactly the same kind of disproportion and reallocation of capital, arising from competition. In those spheres where the organic composition of capital is low, and so the rate of profit is high, capital is under accumulated, and vice versa. Competition for the higher profits leads to capital accumulating faster in the higher profit areas, so that the disproportion is removed, and the rate of profit is equalised, as the increased supply of commodities in this sphere, relative to demand, causes prices and profits to fall.
“In that context it has already been stated that the rise or fall of market-value which is caused by this disproportion, results in the withdrawal of capital from one branch of production and its transfer to another, the migration of capital from one branch of production to another. This equalisation itself however already implies as a precondition the opposite of equalisation and may therefore comprise crisis; the crisis itself may be a form of equalisation. Ricardo etc. admit this form of crisis.” (p 521)
But, the very nature of capitalist production is that it is production not only for the creation of surplus value, but the creation of surplus value on the largest scale possible, whether that is by extending the working day, the creation of relative surplus value, or the employment of ever larger numbers of workers. It requires mass production on an ever larger scale, so that Ricardo is right to see it as production without regard to the market. He is wrong to believe that this increase in production necessarily implies a corresponding increase in consumption or demand.
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