Lenin seems, like Ricardo, Say and Mill to have ignored the question of demand, which is a function of use value not exchange-value, and so assumed that the creation/existence of additional exchange-value translates automatically into the required additional demand for use values, i.e. that production creates its own market, or as Say's Law states, supply creates its own demand. But, as Marx says, if that were the case, and demand and supply increased in the required proportions there would be no basis for crises of overproduction to occur.
“Let us suppose that the whole of society is composed only of industrial capitalists and wage-workers...Then, a crisis could only be explained as the result of a disproportion of production in various branches of the economy, and as a result of a disproportion between the consumption of the capitalists and their accumulation.”
(Capital III, Chapter 30)
The reality is, of course, that such disproportions constantly occur. They result in the constant movements of market prices, above and below the prices of production; they result in partial crises of overproduction, in relation to specific commodities, and in generalised crises of overproduction of commodities. There is also the crises of overproduction of capital, where capital has accumulated in relation to the social working-day to a point, whereby absolute surplus value cannot be expanded further, and rising wages cause relative surplus value to fall. That means any additional accumulation of capital results in no expansion, or even a reduction in surplus value so that the additional capital does not act as capital. As Marx points out, because the elements of this capital – the components of constant and variable-capital – are themselves commodities, an overproduction of capital is itself simultaneously an overproduction of commodities.
Sismondi and Malthus explain crises as arising from under-consumption, whereas Ricardo, Mill and Say deny the possibility of an overproduction of commodities, on the basis of Say's Law that supply creates its own demand. Ricardo, and particularly his followers, however, explain crises as an overproduction of capital.
“Later historical phenomena, especially the almost regular periodicity of crises on the world market, no longer permitted Ricardo’s successors to deny the facts or to interpret them as accidental. Instead—apart from those who explain everything by credit, but then have to admit that they themselves are forced to presuppose the over-abundance of capital—they invented the nice distinction between over-abundance of capital and overproduction.”
(Theories of Surplus Value 2, p 498)
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