b) “An Inquiry into those Principles…” [The Lack of Understanding of the Contradictions of the Capitalist Mode of Production Which Cause Crises]
Marx examines “An Inquiry into those Principles, respecting the Nature of Demand and the Necessity of Consumption, lately advocated by Mr. Malthus etc.,” London, 1821, which is another anonymous work, this time by a Ricardian. Marx notes,
“Good against Malthus. Demonstrates the infinite narrow-mindedness to which the perspicacity of these fellows is reduced as soon as they examine not landed property, but capital. Nevertheless, it is one of the best of the polemical works of the decade mentioned.” (p 117)
Marx provides a quote from the work, which demonstrates the point made earlier that all of these Ricardians failed to distinguish between use value and exchange-value, when it came to analysing supply and demand. In so doing, they denied the fundamental contradiction at the heart of capitalism that results in crises of overproduction. The Ricardian theory takes on Say's Law, and thereby assumes that supply creates its own demand.
““If the capital employed in cutlery is increased as 100:101, and can only produce an increase of cutlery in the same proportion, the degree in which it will increase the command which its producers have over things in general, no increased production of them having by the supposition taken place, will be in a less proportion; and this, and not the increase of the quantity of cutlery, constitutes the employers’ profits, or the increase of their wealth. But if the like addition of one per cent had been making at the same time to the capitals of all other trades […] and with the like result as to produce, this […] would not follow: for the rate at which each article would exchange with the rest would remain unaltered, and therefore a given portion of each would give the same command as before over the rest” ([An Inquiry into those Principles, London, 1821,] p. 9).” (p 117)
In other words, what is being presented is the Ricardian acceptance of the idea of partial overproduction, and under-consumption in other spheres. So, if the capital employed in cutlery production rises by 1%, whilst no additional capital is employed, elsewhere, it is assumed that cutlery output rises by 1%, and as the output of all other commodities remains unchanged, then all of the cutlery cannot be exchanged on the same basis that it previously did. The exchange value of cutlery would fall, as against other commodities. However, the writer continues, if the capital invested in the rest of the economy increases by 1%, with a consequent 1% rise in output, then cutlery can continue to exchange with other commodities at the same exchange-value. This is clearly false, precisely because it omits to take into consideration demand, i.e. it fails to recognise the role of use value in determining demand.
“First of all, if there has been no increase of production (and of the capital devoted to production) except in the cutlery trade, as is assumed, then the return will not be “in a less proportion”, but an absolute loss. There are then only three courses open to the cutlery producer. Either he must exchange his increased product as he would have done his smaller product, and his increased production would thus result in a positive loss. Or he must try to get new consumers; if amongst the old circle, this could only be done by withdrawing customers from another trade and shifting his loss upon other shoulders; or he must enlarge his market beyond his former limits; but neither the one nor the other operation depends on his good will; nor on the mere existence of an increased quantity of knives. Or, in the last instance, he must carry over his production to another year and diminish his new supply for that year, which, if his addition of capital did exist not only in additional wages, but in additional fixed capital, will equally result in a loss.” (p 117-8)
This is a repetition of the point that Marx makes in the Grundrisse, discussing the Civilising Mission of Capital. Capitalism can never develop with capital being employed only in one sphere. It depends upon production undertaken capitalistically finding large markets for the commodities that capital produces. The existence of large markets necessitates that other labourers no longer produce those commodities for themselves, but have to go into the market to buy them, and that implies that those labourers are themselves employed in capitalist production, producing some other set of commodities. The expansion of capital, necessitates, and at the same time requires, a continual expansion of the market, and that also implies that capital itself continually enters into new spheres of production. At certain points, the production of particular types of commodities reaches a level where demand for them cannot be expanded further, or cannot be expanded far enough, at prices high enough, to reproduce the capital consumed in their production. They cannot thereby also validate the capital employed in other spheres, because they cannot be exchanged against those other commodities. At these points, additional accumulation of capital must go into new types of production, the production of new types of use value, for which a demand exists, and can more easily be nurtured.
“On the other side, the production of relative surplus value, i.e. production of surplus value based on the increase and development of the productive forces, requires the production of new consumption; requires that the consuming circle within circulation expands as did the productive circle previously. Firstly quantitative expansion of existing consumption; secondly: creation of new needs by propagating existing ones in a wide circle; thirdly: production of new needs and discovery and creation of new use values. In other words, so that the surplus labour gained does not remain a merely quantitative surplus, but rather constantly increases the circle of qualitative differences within labour (hence of surplus labour), makes it more diverse, more internally differentiated. For example, if, through a doubling of productive force, a capital of 50 can now do what a capital of 100 did before, so that a capital of 50 and the necessary labour corresponding to it become free, then, for the capital and labour which have been set free, a new, qualitatively different branch of production must be created, which satisfies and brings forth a new need. The value of the old industry is preserved by the creation of the fund for a new one in which the relation of capital and labour posits itself in a new form.”
(Grundrisse)
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