The dismissal of the idea of overproduction by Ricardo and other bourgeois economists comes down to a failure to admit the specific characteristics of capitalist production, which ultimately stems from their belief that capitalist production is simply production per se. In other words, they cannot recognise that capitalism is purely a phase of human society, like feudalism, or slave owning societies before it. So, they equate capitalist production and exchange with barter, so that production and consumption, purchase and sale, supply and demand, producers and consumers form an inseparable unity. Although mismatches and disproportions may exist, in total, there is harmony and balance, with the disproportions being remedied via the price mechanism.
Either all of this happens blindly through the market, and “the invisible hand” of competition, or else the implication is that production itself is determined by consumption, as though capital is somehow allocated to the appropriate locations, as if according to some social plan. Its notable that, in the 1930's, when Mises, Hayek and others attacked the impossibility of socialist planning, and of allocating capital accordingly, without the operation of market prices, they did so with a straight face, as though capitalism itself did not lead to gross misallocations of capital, huge overproduction, on the one hand, and massive underproduction on the other. This, as well, during the mass unemployment and waste of resources of the Depression.
“What is supposed to be impossible is only a simultaneous general glut of the market. The possibility of overproduction in any particular sphere of production is therefore not denied. It is the simultaneity of this phenomenon for all spheres of production which is said to be impossible and therefore makes impossible [general] over-production and thus a general glut of the market.” (p 529)
In fact, Marx says, there is never actually a simultaneous overproduction in every sphere. There is usually an overproduction in one or several significant spheres, and this then flows over into the rest of the economy, so that the other spheres then suffer a relative over-production. In other words, they have not themselves overproduced, but as those spheres that have overproduced lay off workers, and cut back their demand for materials etc., this causes a sharp fall in aggregate demand, so that the level of production of other spheres is then higher than this new level of demand for their commodities.
“... in times of general over-production, the over-production in some spheres is always only the result, the consequence, of over-production in the leading articles of commerce; [it is] always only relative, i.e., over-production because over-production exists in other spheres.” (p 529)
But, this is then used by apologists to produce an argument against the possibility of generalised crisis itself. If a generalised crisis is only a relative overproduction by a section of the economy, the argument goes, then its evidence that overproduction by all spheres of the economy is not possible, because it is only a result of a disproportion. If all spheres of the economy overproduced simultaneously, by the same amount, the disproportion would not exist. Marx sets out what this argument boils down to.
If cloth is overproduced, then sufficient yarn must have been produced for that cloth. The overproduction of cloth implies, therefore, that yarn must also have been similarly overproduced. In the same way, if iron, textiles, or any other commodities are overproduced, it implies that all the commodities required as inputs in their production, intermediate goods, were similarly overproduced. Of course, its also possible that, as well as the overproduction of cloth, which implies an overproduction of yarn, yarn could itself be overproduced, as against cloth. In other words, even if there was no overproduction of cloth, there is still an overproduction of yarn, for example, as referred to earlier, as a result of the introduction of spinning machines. This is then an overproduction of constant capital.
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