Crises of overproduction

Crisis of overproduction of commodities and capital

“The Basic Theories of Karl Marx” Chapter 9, on “Marx’s Theory of Crises”. has to be one of the worst things Mandel ever wrote. He belittles the importance of the difference between crises of overproduction of commodities, and crises of overproduction of capital, as being essentially meaningless and irrelevant. (The passages are quoted below, along with the URL for the whole article.)

Mandel correctly notes that there are different forms of capital. Since commodities are on form of capital, he posits that a crisis of overproduction of commodities is a crisis of overproduction of capital, so why bother trying to figure anything else out!

Here is why.

A crisis of overproduction can occur in any particular sector of capitalism, and within a national or regional market. When there is a competitive market, not a monopoly or oligopolistic market, individual producers can not tell in advance how big of a market share they can win. All try to introduce economies of scale and scope if they have the financial capital available to invest and the creativeness to steal or invent new techniques, in the process the scale of production increases, and the total production exceeds the total demand.

You can have a crisis of overproduction of garlic in Gilroy, or shoes in Medellin.

When you approach a crisis of overproduction of goods or services (e.g. garlic or accounting), the rate of profit drops in that sector. Capital seeks higher profits, especially where it can achieve either monopoly profits or rents in addition to normal profits. Investment moves to sectors other than garlic or accounting services.

A generalized crisis of overproduction occurs when markets in all of the main productive sectors become saturated. At this point you also develop a crisis of overproduction of finance capital.

For the capitalist class there are several potential solutions: A) enlarge markets, historically by exporting and investing in other countries. B) create new markets, historically by developing new technology. C) enlarge markets by artificially expanding demand, especially through the extension of credit, military production, and other government subsidies (the New Deal). D. Regulate markets, including production and prices (also the New Deal, especially during WWII.)

Driving down the cost of production, basically speeding up workers and cutting wages and benefits, does not alleviate a crisis of overproduction. In fact it aggravates it by causing the market for consumer goods to shrink. It can however, maintain profitability for businesses as profits begin to fall in the early stages of a crisis of overproduction.

For individual capitalists there are other measures that can be taken: trying to drive your capitalist competitors into bankruptcy, for one.

And, if none of the above measures work, the only other solution for capitalism is to resolve the crisis of overproduction of capital by destroying capital. This means more than destroying fictitious capital and values through market crashes. It means closing factories, destroying “excess” commodities (also a New Deal policy), and if the crisis is bad enough destroying the factories and workers in a war. This was the solution resorted to between 1914 and 1945.

More later, Anthony

“The question of determining whether according to Marx, a crisis of overproduction is first of all a crisis of overproduction of commodities or a crisis of overproduction of capital is really meaningless in the framework of Marx’s economic analysis. The mass of commodities is but one specific form of capital, commodity capital. Under capitalism, which is generalized commodity production, no overproduction is possible which is not simultaneously overproduction of commodities and overproduction of capital (overaccumulation).

“Likewise, the question to know whether the crisis ‘centres’ on the sphere of production or the sphere of circulation is largely meaningless. The crisis is a disturbance (interruption) of the process of enlarged reproduction; and according to Marx, the process of reproduction is precisely a (contradictory) unity of production and circulation. For capitalists, both individually (as separate firms) and as the sum total of firms it is irrelevant whether more surplus-value has actually been produced in the process of production, if that surplus-value cannot be totally realised in the process of circulation. Contrary to many economists, academic and marxist alike, Marx explicitly rejected any Say-like illusion that production more or less automatically finds is own market.”

http://www.internationalviewpoint.org/spip.php?article289