A Characterisation of Economic Romanticism, Chapter 1 - Part 42

Indeed, it is the overproduction of commodities by individual producers, and their ruin which led to their descent into slavery, serfdom or debt bondage. It is also what, when the conditions were right, made it possible for those ruined producers to become employed as wage labourers, and their means of production turned into capital. Mill, Say and Ricardo argued, when pushed, that such overproduction of commodities, by some producers, might be possible, but not by all. But, Marx replies that what is true for one applies equally to all. 

“If the relation of demand and supply is taken in a wider and more concrete sense, then it comprises the relation of production and consumption as well. Here again, the unity of these two phases, which does exist and which forcibly asserts itself during the crisis, must be seen as opposed to the separation and antagonism of these two phases, separation and antagonism which exist just as much, and are moreover typical of bourgeois production. 

With regard to the contradiction between partial and universal over-production, in so far as the existence of the former is affirmed in order to evade the latter, the following observation may be made: 

Firstly: Crises are usually preceded by a general inflation in prices of all articles of capitalist production. All of them therefore participate in the subsequent crash and at their former prices they cause a glut in the market. The market can absorb a larger volume of commodities at falling prices, at prices which have fallen below their cost-prices, than it could absorb at their former prices. The excess of commodities is always relative; in other words it is an excess at particular prices. The prices at which the commodities are then absorbed are ruinous for the producer or merchant. 

Secondly: 

For a crisis (and therefore also for over-production) to be general, it suffices for it to affect the principal commercial goods.” 

(ibid) 

Unfortunately, Lenin lines himself up with Ricardo, Mill and Say behind Say's Law, against Marx, in the claim that supply creates its own demand, or production creates its own market. In doing so, he limits himself to explaining crises only in terms of an over accumulation of capital. 

Lenin describes the theory of under-consumption as set out by Sismondi, Malthus and Rodbertus as the cause of crises. This theory is based on the acceptance of Smith's absurd dogma that the value of the social product resolves entirely into revenues – wages, profits, rent, interest. Given that, in fact, it resolves not only into revenues but also into the value of constant capital – material, wear and tear of fixed capital – produced in previous years, which must also be replaced out of current production, its clear that revenues, themselves, cannot account for the total value of output or total demand for that output. It would always appear that there must be under-consumption, because revenues, and so demand for total output must always be insufficient. 

Output must always outstrip consumption, if consumption is viewed only as personal consumption, and excludes productive consumption. And, as accumulation proceeds, and the technical composition of capital rises, with increased social productivity, the organic composition of capital c:v, and more importantly c:v + s, means that this discrepancy must grow wider.

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