Its not surprising that the modern catastrophists, Malthusians and petty-bourgeois socialists, in claiming to be defending the Marxian law, and, at the same time, claiming for it a role in crises that Marx never gave it, in practice, conflate Marx's law with the Ricardian, or Smithian laws that Marx rejected, and demolished. That is because Marx, in his actual theory of a crisis of overproduction of capital, utilises the explanations of those previous theories, and not the tendential law!
Marx's analysis of a crisis of overproduction of capital, which, itself, involves an overproduction of commodities, because capital is comprised of commodities, is, itself, based not on the law of the tendency for the rate of profit to fall, as he defines it, but, is based on an overproduction of capital relative to the available labour-power, and so on a fall in the rate of surplus value, which, in turn, brings a sharp, and severe fall in the rate of profit. This is quite the opposite condition to that he describes in relation to the long-run tendency for the rate of profit to fall, which is gradual, and “far smaller than it is said to be”.
Yet, the proponents of the tendential law as the cause of crises, of overproduction of capital, never refer to what Marx sets out in his actual theories of crises in Theories of Surplus Value, Chapter 17 and 20, but, instead, refer to Capital III, Chapter 15, which is, odd, because in Chapter 15, Marx sets out the basis of such overproduction, not as arising from the tendential law, but arising from its opposite, the fall in the rate of surplus value. In other words not from rising social productivity, a rise in the technical composition of capital, creation of a relative surplus population, and rising rate and mass of surplus value, but from a shortage of available labour, rising relative wages, falling rate of surplus value, and a sudden drop in the rate of profit!
He writes,
“There would be absolute over-production of capital as soon as additional capital for purposes of capitalist production = 0. The purpose of capitalist production, however, is self-expansion of capital, i.e., appropriation of surplus-labour, production of surplus-value, of profit. As soon as capital would, therefore, have grown in such a ratio to the labouring population that neither the absolute working-time supplied by this population, nor the relative surplus working-time, could be expanded any further (this last would not be feasible at any rate in the case when the demand for labour were so strong that there were a tendency for wages to rise); at a point, therefore, when the increased capital produced just as much, or even less, surplus-value than it did before its increase, there would be absolute over-production of capital; i.e., the increased capital C + ΔC would produce no more, or even less, profit than capital C before its expansion by ΔC. In both cases there would be a steep and sudden fall in the general rate of profit, but this time due to a change in the composition of capital not caused by the development of the productive forces, but rather by a rise in the money-value of the variable capital (because of increased wages) and the corresponding reduction in the proportion of surplus-labour to necessary labour.”
This is also, the same description that Marx sets out, in Theories of Surplus Value, Chapter 21, looking at the growth of capital, and employment of labour, to a point whereby, absolute surplus value cannot be expanded, and where labour shortages also cause, rising wages to limit also, relative surplus value. But, as Marx points out, in relation to the argument by Hodgskin, as with the response to Adam Smith, whilst this expansion of capital relative to labour supply, then leads to a crisis of overproduction of capital, it is precisely that crisis, which leads capital to engage in a technological revolution, and so replace labour, creating a relative surplus population, and rising rate of surplus-value, and a rise in the rate of profit. In other words, it is these conditions, created as a response to, and bringing a resolution to, the crisis of overproduction of capital, that are those described by Marx, as required for the tendential law, i.e. not as a cause of crises, but as the cure for them.
As Marx puts it, in Capital III, Chapter 15,
“Given the necessary means of production, i.e., a sufficient accumulation of capital, the creation of surplus-value is only limited by the labouring population if the rate of surplus-value, i.e., the intensity of exploitation, is given; and no other limit but the intensity of exploitation if the labouring population is given.”
The overproduction of capital is an overproduction relative to the available labour supply/social working-day. The solution is a technological revolution that replaces labour, creates a relative surplus population, raises social productivity, and the rate of surplus value.
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