2. Overproduction of Capital
2.2 As an over-accumulation of capital
b) An overproduction of capital is simultaneously an overproduction of commodities because the elements of capital are comprised of commodities.
The productive-capital comprises commodities in the shape of buildings, machines, raw material. It is not an overproduction of these commodities as commodities per se that exists, but only an overproduction of them in so far as they comprise the elements of productive-capital. Its not that society has produced too many factories, too many machines, too much raw material to meet its needs. On the contrary, to meet its needs, it may have too few of all these things. It has produced too many of them only in the sense that they cannot function as capital, as self-expanding value. That is a form of overproduction that does not exist in other modes of production.
The crisis of overproduction of capital is simply a crisis arising from an over accumulation of productive-capital.
“Over-production of capital, not of individual commodities — although over-production of capital always includes over-production of commodities — is therefore simply over-accumulation of capital.”
(Capital III, Chapter 15)
If a crisis of overproduction arises, then, as Marx describes, this manifests itself not as the very small gradual fall in the rate of profit, represented by the long-term tendency for the rate of profit to fall, but in a sudden collapse in the rate of profit. It means that the current prices obtained for commodities do not reproduce the capital consumed in their production. Because capitalism is a system of continuous production, the commodities physically required to reproduce those consumed are simultaneously being produced, and are flowing out of factories. But, the money-capital realised in the sale of commodities is now no longer sufficient to purchase these replacements at their exchange-value/price of production. Either buyers of these inputs must cut back on their purchases of them, or else the sellers of these inputs must reduce their own prices to clear their production, which results in a sharp fall in their own profits, and so on.
An overproduction in one, or several, spheres then results in those producers under-consuming inputs, which then becomes an overproduction on the part of their suppliers, even if those suppliers have not themselves increased their production. They, in turn, then under-consume the inputs for their own production, causing an overproduction on the part of their suppliers and so on. Whether such a situation results in what Marx describes as a partial crisis of overproduction, or a generalised crisis of overproduction depends upon the number of spheres that have overproduced simultaneously, or on the size of the spheres involved in that overproduction.
This then inevitably results in production of overproduced commodities being cut back. Workers are laid-off, but these laid-off workers then have less wages to spend to buy consumption goods. They reduce their own consumption, which means that the producers of those consumption goods have overproduced. A sharp fall in profits for capitalists, also means they have less revenue to spend to fund their own personal consumption, and so the demand for luxury good also falls, meaning that producers in those spheres have also over produced.
c) Capital may be overproduced because:-
- more commodities are produced than the market can absorb at a price that reproduces the consumed capital.
- Capital expands at a pace that causes the demand for raw materials to rise to a level where its price rises so much that it cannot be passed on into the price of the end product without causing demand to fall significantly, and so where this price rise must be absorbed out of surplus value
- Capital expands at a pace faster than the rise in the social working-day, so that the mass of surplus value grows by less than the growth in the mass of capital. Eventually, this disparity causes the demand for labour-power to rise to a level whereby wages rise, so that the mass of surplus value falls.
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