As Marx says, denying Say's Law, and this idea that production creates its own market.
“At a given moment, the supply of all commodities can be greater than the demand for all commodities, since the demand for the general commodity, money, exchange-value, is greater than the demand for all particular commodities, in other words the motive to turn the commodity into money, to realise its exchange-value, prevails over the motive to transform the commodity again into use-value.”
(Theories of Surplus Value 2, p 505)
Marx notes, for example, that when spinning wheels were introduced this increased production most certainly did not create a market for itself, but led to overproduction.
“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.”
(Theories of Surplus Value 2, Note p 521)
It is, of course, true that, in the long-term, capital accumulation and production leads to an expansion of the market, but that does not at all mean that this happens automatically or smoothly, in the short-term. On the contrary, it only develops on the basis of repeated crises. In noting that Sismondi was correct as against Ricardo, who never witnessed any such crisis of overproduction, Lenin says,
“Hence, “consumption” develops after “accumulation,” or after “production”; strange though it may seem, it cannot be otherwise in capitalist society.” (p 155)
But, again, here, Lenin is one-sided, viewing capitalist production in value terms, and ignoring the question of use-value, which is the problem Marx noted in relation to Ricardo and his followers. Its true, as Marx says in Capital III, Chapter 39, that all producers expand production – other than in a period of crisis or stagnation – on the basis that the market increases each year, as a result of population growth, if nothing else. As each producer expands their production, employing additional workers, they indeed create the revenues that enables consumption to rise, thereby, increasing/creating a market for their production. However, what is it that prompts them to engage in this additional production – production of either consumption or production goods? It is precisely the belief that the market for them is expanding. That is why, when the market is stagnant, they do not engage in such accumulation. As Marx says on this point, made against Ricardo, if, in fact, the market does not expand, or does not expand as fast as production, the inevitable consequence is overproduction and crisis.
In fact, Lenin's argument is rather facile. Suppose that the demand for cotton clothing is expanding rapidly. In response, however, producers of means of production accumulate capital in sheep production, and production of woollen yarn. Would this increased production of woollen cloth result in a market for woollen goods to be produced? Of course not. It would result in an overproduction of wool and woollen cloth, with the prices of those commodities collapsing, and producers being ruined. Meanwhile, cotton producers would make surplus profits as the misallocation of capital would result in a shortage of supply of cotton and cotton yarn, causing their market prices to rise sharply above the price of production.
In accepting Ricardo's position, and, thereby, Say's Law, Lenin prevents himself from recognising the possibility of any overproduction of commodities. But, this reality of overproduction of commodities, as production expands faster than the market, is set out time and again, by Marx and Engels.
“We have seen that the ever increasing perfectibility of modern machinery is, by the anarchy of social production, turned into a compulsory law that forces the individual industrial capitalist always to improve his machinery, always to increase its productive force. The bare possibility of extending the field of production is transformed for him into a similar compulsory law. The enormous expansive force of modern industry, compared with which that of gases is mere child’s play, appears to us now as a necessity for expansion, both qualitative and quantitative, that laughs at all resistance. Such resistance is offered by consumption, by sales, by the markets for the products of modern industry. But the capacity for extension, extensive and intensive, of the markets is primarily governed by quite different laws that work much less energetically. The extension of the markets cannot keep pace with the extension of production. The collision becomes inevitable, and as this cannot produce any real solution so long as it does not break in pieces the capitalist mode of production, the collisions become periodic. Capitalist production has begotten another “vicious circle”.”
(Anti-Duhring, p 355)
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