WARNING - If you are personally insulted by long quotations from Karl Marx or detailed presentations on economics or "theory", go no further. For the rest, abandon all hope all ye who enter here. What follows is a detailed elaboration by Marx on the nature of capitalist crisis, in the form of a critique of David Ricardo's theory of Capital Accumulation. It is more accurate, and more timely, than anything written by anyone in the last year, in the midst of the worst Capitalist crisis since the Great Depression.

The Controversy - At the beginning of the Manifesto is this famous and oft quoted passage about economic crisis:


"For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeois and of its rule. It is enough to mention the commercial crises that by their periodical return put the existence of the entire bourgeois society on its trial, each time more threateningly. In these crises, a great part not only of the existing products, but also of the previously created productive forces, are periodically destroyed. In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity — the epidemic of over-production. Society suddenly finds itself put back into a state of momentary barbarism; it appears as if a famine, a universal war of devastation, had cut off the supply of every means of subsistence; industry and commerce seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce. The productive forces at the disposal of society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented. "

For all its fame, the forgoing passage has somehow become controversial in the last two or three decades. A series of "Marxist" writers have contended that Marx never returned to this wording. The implication is that this proposition was superseded by Marx's later scholarship during the decade and a half between this phrasing and the publication of Capital. Some have focused on presenting largely technical foundations to economic crisis, pointing to the change in the composition of Capital or to the tendency of the Rate of Profit to fall (both true, but not in the narrow way that these writers intend). Others have suggested that this wording actually belonged to Engels and that Marx never subscribed to it.

Why should such a debate occur at all? What difference does it make? In truth, the issue is central if obscure. In the end, it is a question of whether capitalism can be "reformed", perhaps through policy alone. There was another time when this question was also raised - during the Great Depression. Keynes' famous dismissal of "Marx's crisis", that it could be avoided by a "socialization of investment", was only one salvo in that previous battle.

The question, then, is one of how fundamental economic "crisis" is to capitalism itself.... and what the ever-weighty Mr. Marx had to say on the subject. My reasons for presenting the following are two-fold. First, we have read the beginning sections of Capital together and there is probably no better time to explore how the "two-fold nature of commodities" asserts itself at the other end of the spectrum, when the economy falls down about our ears. Second, my good friend, KOBH, insists on reading voraciously and bugging me with questions about these controversies. They puzzle him.

In truth, they puzzle me too. What follows is relatively well known and not ambiguous in the least. Perhaps it is a short period (30 years) of relative calm in the stormy seas of recession and depression which leads people to forget what they once knew.

Theories of Surplus Value - What is the ToSV? It is nothing other than Marx's notebooks on Political Economy, running to 1400-plus numbered pages and were compiled immediately after his A Contribution to the Critique of Political Economy . They cover his criticism of the entire social science to that point. Marx called it his "Historic-critical" section, or what would today be called a "survey". As “surveys” go, however, one which chooses for its domain, an entire social science… that is unusual.

The ToSV was always intended for publication but was never finished, and it was pulled together by Engels after Marx's death. How it was to be published changed during the course of its life. Originally it was intended to come at the end of Volume I of Capital, then it was to be Volume III of Capital when Volumes I to III were originally to be published as two Volumes and, finally, it was actually published with the sub-title of "Volume IV" of Capital. As Marx himself said, it was to come at the end of the theoretical material although they had obviously been written in reverse order.

The ToSV is here:
http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/index.htm

Our Method - The material of interest to us is Sections 6 through 14 of Chapter XVII in Part II of ToSV. I will reproduce each section as a separate post to allow comments and discussion in between. The text reproduced has all emphasis removed and my emphasis is substituted. I strongly urge reading the original as well. The text is very lengthy but it does not require the same “line by line” reading as the beginning parts of Capital.

The selection is here:

Chapter XVII: Ricardo’s Theory of Accumulation and a Critique of it (The Very Nature of Capital Leads to Crises)

http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch17.htm

6. Crises (Introductory Remarks)

If expanded production of constant capital is assumed—that is greater production than is required for the replacement of the former capital and therefore also for the production of the former quantity of means of subsistence—expanded production or accumulation in the spheres using the machinery, raw materials etc. encounters no further difficulties. If sufficient additional labor is available, they (the manufacturers) will find on the market all the means for the formation of new capital, for the transformation of their additional money into new capital.

But the whole process of accumulation in the first place resolves itself into production on an expanding scale, which on the one hand corresponds to the natural growth of the population, and on the other hand, forms an inherent basis for the phenomena which appear during crises. The criterion of this expansion of production is capital itself, the existing level of the conditions of production and the unlimited desire of the capitalists to enrich themselves and to enlarge their capital, but by no means consumption, which from the outset is inhibited, since the majority of the population, the working people, can only expand their consumption within very narrow limits, whereas the demand for labor, although it grows absolutely, decreases relatively, to the same extent as capitalism develops. Moreover, all equalizations are accidental and although the proportion of capital employed in individual spheres is equalized by a continuous process, the continuity of this process itself equally presupposes the constant disproportion which it has continuously, often violently, to even out.

Here we need only consider the forms which capital passes through in the various stages of its development. The real conditions within which the actual process of production takes place are therefore not analysed. It is assumed throughout, that the commodity is sold at its value. We do not examine the competition of capitals, nor the credit system, nor the actual composition of society, which by no means consists only of two classes, workers and industrial capitalists, and where therefore consumers and producers are not identical categories. The first category, that of the consumers (whose revenues are in part not primary, but secondary, derived from profit and wages), is much broader than the second category [producers], and therefore the way in which they spend their revenue, and the very size of the revenue give rise to very considerable modifications in the economy and particularly in the circulation and reproduction process of capital. Nevertheless, just as the examination of money— both in so far as it represents a form altogether different from the natural form of commodities, and also in its form as means of payment—has shown that it contained the possibility of crises; the examination of the general nature of capital, even without going further into the actual relations which all constitute prerequisites for the real process of production, reveals this still more clearly.

The conception (which really belongs to James Mill), adopted by Ricardo from the tedious Say (and to which we shall return when we discuss that miserable individual), that overproduction is not possible or at least that no general glut of the market is possible, is based on the proposition that products are exchanged against products, or as Mill put it, on the “metaphysical equilibrium of sellers and buyers”, and this led to [the conclusion] that demand is determined only by production, or also that demand and supply are identical. The same proposition exists also in the form, which Ricardo liked particularly, that any amount of capital can be employed productively in any country.

“M. Say,” writes Ricardo in Chapter XXI (“Effects of Accumulation on Profits and Interest”), “has…most satisfactorily shown, that there is no amount of capital which may not be employed in a country, because demand is only limited by production. No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some other person. It is not to he supposed that he should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and, therefore, it is not probable that he will continually” (the point in question here is not eternal life) “produce a commodity for which there is no demand.” ([David Ricardo, On the Principles of Political Economy, and Taxation, London, 1821,] pp. 339-40.)

Ricardo, who always strives to be consistent, discovers that his authority, Say, is playing a trick on him here. He makes the following comment in a footnote to this passage:

“Is the following quite consistent with M. Say’s principle? “The more disposable capitals are abundant in proportion to the extent of employment for them, the more will the rate of interest on loans of capital fall.’ (Say, Vol. II, p. 108.) If capital to any extent can be employed by a country, how can it be said to be abundant, compared with the extent of employment for it?” ([Ricardo], l.c., p. 340, note.)

Since Ricardo cites Say, we shall criticize Say’s theories later, when we deal with this humbug himself.

Meanwhile we just note here: In reproduction, just as in the accumulation of capital, it is not only a question of replacing the same quantity of use-values of which capital consists, on the former scale or on an enlarged scale (in the case of accumulation), but of replacing the value of the capital advanced along with the usual rate of profit (surplus-value). If, therefore, through any circumstance or combination of circumstances, the market-prices of the commodities (of all or most of them, it makes no difference) fall far below their cost-prices, then reproduction of capital is curtailed as far as possible. Accumulation, however, stagnates even more. Surplus-value amassed in the form of money (gold or notes) could only be transformed into capital at a loss. It therefore lies idle as a hoard in the banks or in the form of credit money, which in essence makes no difference at all. The same hold up could occur for the opposite reasons, if the real prerequisites of reproduction were missing (for instance if grain became more expensive or because not enough constant capital had been accumulated in kind). There occurs a stoppage in reproduction, and thus in the flow of circulation. Purchase and sale get bogged down and unemployed capital appears in the form of idle money. The same phenomenon (and this usually precedes crises) can appear when additional capital is produced at a very rapid rate and its reconversion into productive capital increases the demand for all the elements of the latter to such an extent that actual production cannot keep pace with it; this brings about a rise in the prices of all commodities, which enter into the formation of capital. In this case the rate of interest falls sharply, however much the profit may rise and this fall in the rate of interest then leads to the most risky speculative ventures. The interruption of the reproduction process leads to the decrease in variable capital, to a fall in wages and in the quantity of labor employed. This in turn reacts anew on prices and leads to their further fall.

It must never be forgotten, that in capitalist production what matters is not the immediate use-value but the exchange-value and, in particular, the expansion of surplus-value. This is the driving motive of capitalist production, and it is a pretty conception that—in order to reason away the contradictions of capitalist production—abstracts from its very basis and depicts it as a production aiming at the direct satisfaction of the consumption of the producers.

Further: since the circulation process of capital is not completed in one day but extends over a fairly long period until the capital returns to its original form, since this period coincides with the period within which market-prices equalize with cost-prices, and great upheavals and changes take place in the market in the course of this period, since great changes take place in the productivity of labor and therefore also in the real value of commodities, it is quite clear, that between the starting-point, the prerequisite capital, and the time of its return at the end of one of these periods, great catastrophes must occur and elements of crisis must have gathered and develop, and these cannot in any way be dismissed by the pitiful proposition that products exchange for products. The comparison of value in one period with the value of the same commodities in a later period is no scholastic illusion, as Mr. Bailey maintains, but rather forms the fundamental principle of the circulation process of capital.

When speaking of the destruction of capital through crises, one must distinguish between two factors.

In so far as the reproduction process is checked and the labor-process is restricted or in some instances is completely stopped, real capital is destroyed. Machinery which is not used is not capital. Labor which is not exploited is equivalent to lost production. Raw material which lies unused is no capital. Buildings (also newly built machinery) which are either unused or remain unfinished, commodities which rot in warehouses— all this is destruction of capital. All this means that the process of reproduction is checked and that the existing means of production are not really used as means of production, are not put into operation. Thus their use-value and their exchange-value go to the devil.

Secondly, however, the destruction of capital through crises means the depreciation of values which prevents them from later renewing their reproduction process as capital on the same scale. This is the ruinous effect of the fall in the prices of commodities. It does not cause the destruction of any use-values. What one loses, the other gains. Values used as capital are prevented from acting again as capital in the hands of the same person. The old capitalists go bankrupt. If the value of the commodities from whose sale a capitalist reproduces his capital was equal to £ 12,000, of which say £ 2,000 were profit, and their price falls to £ 6,000, then the capitalist can neither meet his contracted obligations nor, even if he had none, could he, with the £ 6,000 restart his business on the former scale, for the commodity prices have risen once more to the level of their cost-prices. In this way, £ 6,000 has been destroyed, although the buyer of these commodities, because he has acquired them at half their cost-price, can go ahead very well once business livens up again, and may even have made a profit. A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction. This is also the period during which moneyed interest enriches itself at the cost of industrial interest. As regards the fall in the purely nominal capital, State bonds, shares etc.—in so far as it does not lead to the bankruptcy of the state or of the share company, or to the complete stoppage of reproduction through undermining the credit of the industrial capitalists who hold such securities—it amounts only to the transfer of wealth from one hand to another and will, on the whole, act favorably upon reproduction, since the parvenus into whose hands these stocks or shares fall cheaply, are mostly more enterprising than their former owners.

7. Absurd Denial of the Over-production of Commodities, Accompanied by a Recognition of the Over-abundance of Capital

To the best of his knowledge, Ricardo is always consistent. For him, therefore, the statement that no over-production (of commodities) is possible, is synonymous with the statement that no plethora or over-abundance of capital is possible.*
“There cannot, then, be accumulated in a country any amount of capital which cannot be employed productively, until wages rise so high in consequence of the rise of necessaries, and so little consequently remains for the profits of stock, that the motive for accumulation ceases” ( [Ricardo], l.c., p. 340). “It follows then … that there is no limit to demand—no limit to the employment of capital while it yields any profit, and that however abundant capital may become, there is no other adequate reason for a fall of profit but a rise of wages, and further it may be added, that the only adequate and permanent cause for the rise of wages is the increasing difficulty of providing food and necessaries ||707| for the increasing number of workmen” (l.c., pp. 347-48).

What then would Ricardo have said to the stupidity of his successors, who deny over-production in one form (as a general glut of commodities in the market) and who, not only admit its existence in another form, as over-production of capital, plethora of capital, over-abundance of capital, but actually turn it into an essential point in their doctrine?

Not a single responsible economist of the post-Ricardian period denies the plethora of capital. On the contrary, all of them regard it as the cause of crises (in so far as they do not explain the latter by factors relating to credit). Therefore, they all admit over—production in one form but deny its existence in another. The only remaining question thus is: what is the relation between these two forms of over-production, i.e., between the form in which it is denied and the form in which it is asserted?

Ricardo himself did not actually know anything of crises, of general crises of the world market, arising out of the production process itself. He could explain that the crises which occurred between 1800 and 1815, were caused by the rise in the price of corn due to poor harvests, by the devaluation of paper currency, the depreciation of colonial products etc., because, in consequence of the continental blockade, the market was forcibly contracted for political and not economic reasons. He was also able to explain the crises after 1815, partly by a bad year and a shortage of corn, and partly by the fall in corn prices, because those causes which, according to his own theory, had forced up the price of corn during the war when England was cut off from the continent, had ceased to operate; partly by the transition from war to peace which brought about “sudden changes in the channels of trade” [l.c., p. 307). (See Chapter XIX—“On Sudden Changes in the Channels of Trade”—of his Principles.)


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. Against the latter, they arm themselves with the phrases and good reasons used by Ricardo and Adam Smith, while by means of the over-abundance of capital they attempt to explain phenomena that they are otherwise unable to explain. Wilson, for example; explains certain crises by the overabundance of fixed capital, while he explains others by the overabundance of circulating capital. The over-abundance of capital itself is affirmed by the best economists (such as Fullarton), and has already become a matter of course to such an extent, that it can even be found in the learned Roscher’s compendium as a self-evident fact.

The question is, therefore, what is the over-abundance of capital and how does it differ from over-production?

(In all fairness however, it must be said, that other economists, such as Ure, Corbet etc., declare over-production to be the usual condition in large-scale industry, so far as the home country is concerned and that it thus only leads to crises under certain circumstances, in which the foreign market also contracts.)

According to the same economists, capital is equivalent to money or commodities. Over-production of capital is thus overproduction of money or of commodities. And yet these two phenomena are supposed to have nothing in common with each other, Even the over-production of money [is of] no [avail], since money for them is a commodity, so that the entire phenomenon resolves into one of over-production of commodities which they admit under one name and deny under another. Moreover, the statement that there is over-production of fixed capital or of circulating capital, is based on the fact that commodities are here no longer considered in this simple form, but in their designation as capital. This, however, is an admission that in capitalist production and its phenomena—e.g., over-production—it is a question not only of the simple relationship in which the product appears, is designated, as commodity, but of its designation within the social framework, it thereby becomes something more than, and also different from, a commodity.

Altogether, the phrase over-abundance of capital instead of over-production of commodities in so far as it is not merely a prevaricating expression, or unscrupulous thoughtlessness, which admits the existence and necessity of a particular phenomenon when it is called A, but denies it as soon as it is called B, in fact therefore showing scruples and doubts only about the name of the phenomenon and not the phenomenon itself; or in so far as it is not merely an attempt to avoid the difficulty of explaining the phenomenon, by denying it in one form (under one name) in which it contradicts existing prejudices and admitting it in a form only in which it becomes meaningless—apart from these aspects, the transition from the phrase “over-production of commodities” to the phrase “over-abundance of capital” is indeed an advance. In what does this consist? In [expressing the fact], that the producers confront one another not purely as owners of commodities, but as capitalists.

8. Ricardo’s Denial of General Over-production. Possibility of a Crisis Inherent in the Inner Contradictions of Commodity and Money

A few more passages from Ricardo:

“One would be led to think.., that Adam Smith concluded we were under some necessity” (this is indeed the case) “of producing a surplus of corn, woollen goods, and hardware, and that the capital which produced them could not he otherwise employed. It is, however, always a matter of choice in what way a capital shall he employed, and therefore there can never, for any length of time, be a surplus of any commodity; for if there were, it would fall below its natural price, and capital would be removed to some more profitable employment” (l.c., pp. 341-42, note).

“Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected.”

(That is to say, money is merely a means of circulation, and exchange-value itself is merely a fleeting aspect of the exchange of product against product—which is wrong.)

“Too much of a particular commodity may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with […] all commodities” (l.c., pp. 341-42).

“Whether these increased productions, and consequent demand which they occasion, shall or shall not lower profits, depends solely on the rise of wages; and the rise of wages, excepting for a limited period, on the facility of producing the food and necessaries of the labourer” (l.c., p. 343).

“When merchants engage their capitals in foreign trade, or in the carrying trade, it is always from choice, and never from necessity: it is because in that trade their profits will be somewhat greater than in the home trade” (l.c., p. 344).

So far as crises are concerned, all those writers who describe the real movement of prices, or all experts, who write in the actual situation of a crisis, have been right in ignoring the allegedly theoretical twaddle and in contenting themselves with the idea that what may be true in abstract theory—namely, that no gluts of the market and so forth are possible—is, nevertheless, wrong in practice. The constant recurrence of crises has in fact reduced the rigmarole of Say and others to a phraseology which is now only used in times of prosperity but is cast aside in times of crises.

In the crises of the world market, the contradictions and antagonisms of bourgeois production are strikingly revealed. Instead of investigating the nature of the conflicting elements which errupt in the catastrophe, the apologists content themselves with denying the catastrophe itself and insisting, in the face of their regular and periodic recurrence, that if production were carried on according to the textbooks, crises would never occur. Thus the apologetics consist in the falsification of the simplest economic relations, and particularly in clinging to the concept of unity in the face of contradiction.

If, for example, purchase and sale—or the metamorphosis of commodities—represent the unity of two processes, or rather the movement of one process through two opposite phases, and thus essentially the unity of the two phases, the movement is essentially just as much the separation of these two phases and their becoming independent of each other. Since, however, they belong together, the independence of the two correlated aspects can only show itself forcibly, as a destructive process. It is just the crisis in which they assert their unity, the unity of the different aspects. The independence which these two linked and complimentary phases assume in relation to each other is forcibly destroyed. Thus the crisis manifests the unity of the two phases that have become independent of each other. There would be no crisis without this inner unity of factors that are apparently indifferent to each other. But no, says the apologetic economist. Because there is this unity, there can be no crises. Which in turn means nothing but that the unity of contradictory factors excludes contradiction.

In order to prove that capitalist production cannot lead to general crises, all its conditions and distinct forms, all its principles and specific features—in short capitalist production itself—are denied. In fact it is demonstrated that if the capitalist mode of production had not developed in a specific way and become a unique form of social production, but were a mode of production dating back to the most rudimentary stages, then its peculiar contradictions and conflicts and hence also their eruption in crises would not exist.

Following Say, Ricardo writes: “Productions are always bought by productions, or by services; money is only the medium by which the exchange is effected” (l.c., p. 341).

Here, therefore, firstly commodity, in which the contradiction between exchange-value and use-value exists, becomes mere product (use-value) and therefore the exchange of commodities is transformed into mere barter of products, of simple use-values. This is a return not only to the time before capitalist production, but even to the time before there was simple commodity production; and the most complicated phenomenon of capitalist production—the world market crisis—is flatly denied, by denying the first condition of capitalist production, namely, that the product must be a commodity and therefore express itself as money and undergo the process of metamorphosis. Instead of speaking of wage-labour, the term “services” is used. This word again omits the specific characteristic of wage-labour and of its use—namely, that it increases the value of the commodities against which it is exchanged, that it creates surplus-value—and in doing so, it disregards the specific relationship through which money and commodities are transformed into capital. “Service” is labour seen only as use-value (which is a side issue in capitalist production) just as the term “productions” fails to express the essence of commodity and its inherent contradiction. It is quite consistent that money is then regarded merely as an intermediary in the exchange of products, and not as an essential and necessary form of existence of the commodity which must manifest itself as exchange-value, as general social labour. Since the transformation of the commodity into mere use-value (product) obliterates the essence of exchange-value, it is just as easy to deny, or rather it is necessary to deny, that money is an essential aspect of the commodity and that in the process of metamorphosis it is independent of the original form of the commodity.

Crises are thus reasoned out of existence here by forgetting or denying the first elements of capitalist production: the existence of the product as a commodity, the duplication of the commodity in commodity and money, the consequent separation which takes place in the exchange of commodities and finally the relation of money or commodities to wage-labour.

Incidentally, those economists are no better, who (like John Stuart Mill) want to explain the crises by these simple possibilities of crisis contained in the metamorphosis of commodities—such as the separation between purchase and sale. These factors which explain the possibility of crises, by no means explain their actual occurrence. They do not explain why the phases of the process come into such conflict that their inner unity can only assert itself through a crisis, through a violent process. This separation appears in the crisis; it is the elementary form of the crisis. To explain the crisis on the basis of this, its elementary form, is to explain the existence of the crisis by describing its most abstract form, that is to say, to explain the crisis by the crisis.

Ricardo says: “No man produces, but with a view to consume or sell, and he never sells, but with an intention to purchase some other commodity, which may be immediately useful to him, or which may contribute to future production. By producing, then, he necessarily becomes either the consumer of his own goods, or the purchaser and consumer of the goods of some person. It is not to be supposed that be should, for any length of time, be ill-informed of the commodities which he can most advantageously produce, to attain the object which he has in view, namely, the possession of other goods; and, therefore, it is not probable that he will continually produce a commodity for which there is no demand” [l.c., pp. 339-40].

This is the childish babble of a Say, but it is not worthy of Ricardo. In the first place, no capitalist produces in order to consume his product. And when speaking of capitalist production, it is right to say that: “no man produces with a view to consume his own product”, even if he uses portions of his product for industrial consumption. But here the point in question is private consumption. Previously it was forgotten that the product is a commodity. Now even the social division of labour is forgotten. In a situation where men produce for themselves, there are indeed no crises, but neither is there capitalist production. Nor have we ever heard that the ancients, with their slave production ever knew crises, although individual producers among the ancients too, did go bankrupt. The first part of the alternative is nonsense. The second as well. A man who has produced, does not have the choice of selling or not selling. He must sell. In the crisis there arises the very situation in which he cannot sell or can only sell below the cost-price or must even sell at a positive loss. What difference does it make, therefore, to him or to us that he has produced in order to sell? The very question we want to solve is what has thwarted this good intention of his?

Further:

he “never sells, but with an intention to purchase some other commodity, which may he immediately useful to him, or which may contribute to future production” (l.c., p. 339).

What a cosy description of bourgeois conditions! Ricardo even forgets that a person may sell in order to pay, and that these forced sales play a very significant role in the crises. The capitalist’s immediate object in selling, is to turn his commodity, or rather his commodity capital, back into money capital, and thereby to realise his profit. Consumption—revenue—is by no means the guiding motive in this process, although it is for the person who only sells commodities in order to transform them into means of subsistence. But this is not capitalist production, in which revenue appears as the result and not as the determining purpose. Everyone sells first of all in order to sell, that is to say, in order to transform commodities into money.

During the crisis, a man may be very pleased, if he has sold his commodities without immediately thinking of a purchase. On the other hand, if the value that has been realised is again to be used as capital, it must go through the process of reproduction, that is, it must be exchanged for labour and commodities. But the crisis is precisely the phase of disturbance and interruption of the process of reproduction. And this disturbance cannot be explained by the fact that it does not occur in those times when there is no crisis. There is no doubt that no one “will continually produce a commodity for which there is no demand” (l.c., p. 340), but no one is talking about such an absurd hypothesis. Nor has it anything to do with the problem. The immediate purpose of capitalist production is not “the possession of other goods”, but the appropriation of value, of money, of abstract wealth.

Ricardo’s statements here are also based on James Mills’s proposition on the “metaphysical equilibrium of purchases and sales”, which I examined previously—an equilibrium which sees only the unity, but not the separation in the processes of purchase and sale, Hence also Ricardo’s assertion (following James Mill):

“Too much of a particular commodity may he produced, of which there may be such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities” (l.c., pp. 341-42).

Money is not only “the medium by which the exchange is effected” (l.c., p. 341), but at the same time the medium by which the exchange of product with product is divided into two acts, which are independent of each other, and separate in time and space. With Ricardo, however, this false conception of money is due to the fact that he concentrates exclusively on the quantitative determination of exchange-value, namely, that it is equal to a definite quantity of labour-time, forgetting on the other hand the qualitative characteristic, that individual labour must present itself as abstract, general social labour only through its alienation.*

That only particular commodities, and not all kinds of commodities, can form “a glut in the market” and that therefore over-production can always only be partial, is a poor way out. In the first place, if we consider only the nature of the commodity, there is nothing to prevent all commodities from being superabundant on the market, and therefore all falling below their price. We are here only concerned with the factor of crisis. That is all commodities, apart from money [may be superabundant]. [The proposition] the commodity must be converted into money, only means that: all commodities must do so. And just as the difficulty of undergoing this metamorphosis exists for an individual commodity, so it can exist for all commodities. The general nature of the metamorphosis of commodities—which includes the separation of purchase and sale just as it does their unity—instead of excluding the possibility of a general glut, on the contrary, contains the possibility of a general glut.

Ricardo’s and similar types of reasoning are moreover based not only on the relation of purchase and sale, but also on that of demand and supply, which we have to examine only when considering the competition of capitals. As Mill says purchase is sale etc., therefore demand is supply and supply demand. But they also fall apart and can become independent of each other. 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.

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.

9. Ricardo’s Wrong Conception of the Relation Between Production and Consumption under the Conditions of Capitalism

Let us take a closer look at how Ricardo seeks to deny the possibility of a general glut in the market:

“Too much of a particular commodity may he produced, of which there may he such a glut in the market, as not to repay the capital expended on it; but this cannot be the case with respect to all commodities; the demand for corn is limited by the mouths which are to eat it, for shoes and coats by the persons who are to wear them; but though a community, or a part of a community, may have as much corn, and as many hats and shoes, as it is able or may wish to consume, the same cannot be said of every commodity produced by nature or by art. Some would consume more wine, if they had the ability to procure it. Others having enough of wine, would wish to increase the quantity or improve the quality of their furniture. Others might wish to ornament their grounds, or to enlarge their houses. The wish to do all or some of these is implanted in every man’s breast; nothing is required but the means, and nothing can afford the means, but an increase of production” (l.c., pp. 341-42).

Could there be a more childish argument? It runs like this: more of a particular commodity may be produced than can be consumed of it; but this cannot apply to all commodities at the same time. Because the needs, which the commodities satisfy, have no limits and all these needs are not satisfied at the same time. On the contrary. The fulfilment of one need makes another, so to speak, latent. Thus nothing is required, but the means to satisfy these wants, and these means can only be provided through an increase in production. Hence no general overproduction is possible.

What is the purpose of all this? In periods of over-production, a large part of the nation (especially the working class) is less well provided than ever with corn, shoes etc., not to speak of wine and furniture. If over-production could only occur when all the members of a nation had satisfied even their most urgent needs, there could never, in the history of bourgeois society up to now, have been a state of general over-production or even of partial over-production. When, for instance, the market is glutted by shoes or calicoes or wines or colonial products, does this perhaps mean that four-sixths of the nation have more than satisfied their needs in shoes, calicoes etc.? What after all has over-production to do with absolute needs? It is only concerned with demand that is backed by ability to pay. It is not a question of absolute over-production—over-production as such in relation to the absolute need or the desire to possess commodities. In this sense there is neither partial nor general over-production; and the one is not opposed to the other.

But—Ricardo will say—when there are a lot of people who want shoes and calicoes, why do they not obtain the means to acquire them, by producing something which will enable them to buy shoes and calicoes? Would it not be even simpler to say: Why do they not produce shoes and calicoes for themselves? An even stranger aspect of over-production is that the workers, the actual producers of the very commodities which glut the market, are in need of these commodities. It cannot be said here that they should produce things in order to obtain them, for they have produced them and yet they have not got them. Nor can it be said that a particular commodity gluts the market, because no one is in want of it. If, therefore, it is even impossible to explain that partial over-production arises because the demand for the commodities that glut the market has been more than satisfied, it is quite impossible to explain away universal over-production by declaring that needs, unsatisfied needs, exist for many of the commodities which are on the market.

Let us keep to the example of the weaver of calico. So long as reproduction continued uninterruptedly—and therefore also the phase of this reproduction in which the product existing as a saleable commodity, the calico, was reconverted into money, at its value—so long, shall we say, the workers who produced the calico, also consumed a part of it, and with the expansion of reproduction, that is to say, with accumulation, they were consuming more of it, or also more workers were employed in the production of calico, who also consumed part of it.

10. Crisis, Which Was a Contingency, Becomes a Certainty. The Crisis as the Manifestation of All the Contradictions of Bourgeois Economy

Now before we proceed further, the following must be said:

The possibility of crisis, which became apparent in the simple metamorphosis of the commodity, is once more demonstrated, and further developed, by the disjunction between the (direct) process of production and the process of circulation. As soon as these processes do not merge smoothly into one another but become independent of one another, the crisis is there.

The possibility of crisis is indicated in the metamorphosis of the commodity like this:

Firstly, the commodity which actually exists as use-value, and nominally, in its price, as exchange-value, must be transformed into money. C-M. If this difficulty, the sale, is solved then the purchase, M-C, presents no difficulty, since money is directly exchangeable for everything else. The use-value of the commodity, the usefulness of the labour contained in it, must be assumed from the start, otherwise it is no commodity at all. It is further assumed that the individual value of the commodity is equal to its social value, that is to say, that the labour-time materialised in it is equal to the socially necessary labour-time for the production of this commodity. The possibility of a crisis, in so far as it shows itself in the simple form of metamorphosis, thus only arises from the fact that the differences in form—the phases—which it passes through in the course of its progress, are in the first place necessarily complimentary and secondly, despite this intrinsic and necessary correlation, they are distinct parts and forms of the process, independent of each other diverging in time and space, separable and separated from each other. The possibility of crisis therefore lies solely in the separation of sale from purchase. It is thus only in the form of commodity that the commodity has to pass through this difficulty here. As soon as it assumes the form of money it has got over this difficulty. Subsequently however this too resolves into the separation of sale and purchase. If the commodity could not be withdrawn from circulation in the form of money or its retransformation into commodity could not be postponed—as with direct barter—if purchase and sale coincided, then the possibility of crisis would, under the assumptions made, disappear. For it is assumed that the commodity represents use-value for other owners of commodities. In the form of direct barter, the commodity is not exchangeable only if it has no use-value or when there are no other use-values on the other side which can be exchanged for it; therefore, only under these two conditions: either if one side has produced useless things or if the other side has nothing useful to exchange as an equivalent for the first use-value. In both cases, however, no exchange whatsoever would take place. But in so far as exchange did take place, its phases would not be separated. The buyer would be seller and the seller buyer. The critical stage, which arises from the form of the exchange—in so far as it is circulation—would therefore cease to exist, and if we say that the simple form of metamorphosis comprises the possibility of crisis, we only say that in this form itself lies the possibility of the rupture and separation of essentially complimentary phases.

But this applies also to the content. In direct barter, the bulk of production is intended by the producer to satisfy his own needs, or, where the division of labour is more developed, to satisfy the needs of his fellow producers, needs that are known to him. What is exchanged as a commodity is the surplus and it is unimportant whether this surplus is exchanged or not. In commodity production the conversion of the product into money, the sale, is a conditio sine qua non. Direct production for personal needs does not take place. Crisis results from the impossibility to sell. The difficulty of transforming the commodity—the particular product of individual labour—into its opposite, money, i.e., abstract general social labour, lies in the fact that money is not the particular product of individual labour, and that the person who has effected a sale, who therefore has commodities in the form of money, is not compelled to buy again at once, to transform the money again into a particular product of individual labour. In barter this contradiction does not exist: no one can be a seller without being a buyer or a buyer without being a seller. The difficulty of the seller—on the assumption that his commodity has use-value—only stems from the ease with which the buyer can defer the retransformation of money into commodity. The difficulty of converting the commodity into money, of selling it, only arises from the fact that the commodity must be turned into money but the money need not be immediately turned into commodity, and therefore sale and purchase can be separated. We have said that this form contains the possibility of crisis, that is to say, the possibility that elements which are correlated, which are inseparable, are separated and consequently are forcibly reunited, their coherence is violently asserted against their mutual independence. Crisis is nothing but the forcible assertion of the unity of phases of the production process which have become independent of each other.

The general, abstract possibility of crisis denotes no more than the most abstract form of crisis, without content, without a compelling motivating factor. Sale and purchase may fall apart. They thus represent potential crisis and their coincidence always remains a critical factor for the commodity. The transition from one to the other may, however, proceed smoothly, The most abstract form of crisis (and therefore the formal possibility of crisis) is thus the metamorphosis of the commodity itself; the contradiction of exchange-value and use-value, and furthermore of money and commodity, comprised within the unity of the commodity, exists in metamorphosis only as an involved movement. The factors which turn this possibility of crisis into [an actual] crisis are not contained in this form itself; it only implies that the framework for a crisis exists.

And in a consideration of the bourgeois economy, that is the important thing. The world trade crises must be regarded as the real concentration and forcible adjustment of all the contradictions of bourgeois economy. The individual factors, which are condensed in these crises, must therefore emerge and must be described in each sphere of the bourgeois economy and the further we advance in our examination of the latter, the more aspects of this conflict must be traced on the one hand, and on the other hand it must be shown that its more abstract forms are recurring and are contained in the more concrete forms.

It can therefore be said that the crisis in its first form is the metamorphosis of the commodity itself, the falling asunder of purchase and sale.

The crisis in its second form is the function of money as a means of payment, in which money has two different functions and figures in two different phases, divided from each other in time. Both these forms are as yet quite abstract, although the second is more concrete than the first.

To begin with therefore, in considering the reproduction process of capital (which coincides with its circulation) it is necessary to prove that the above forms are simply repeated, or rather, that only here they receive a content, a basis on which to manifest themselves.

Let us look at the movement of capital from the moment in which it leaves the production process as a commodity in order once again to emerge from it as a commodity. If we abstract here from all the other factors determining its content, then the total commodity capital and each individual commodity of which it is made up, must go through the process C—M—C, the metamorphosis of the commodity. The general possibility of crisis, which is contained in this form—the falling apart of purchase and sale—is thus contained in the movement of capital, in so far as the latter is also commodity and nothing but commodity. From the interconnection of the metamorphoses of commodities it follows, moreover, that one commodity is transformed into money because another is retransformed from the form of money into commodity. Furthermore, the separation of purchase and sale appears here in such a way that the transformation of one capital from the form commodity into the form money, must correspond to the retransformation of the other capital from the form money into the form commodity. The first metamorphosis of one capital must correspond to the second metamorphosis of the other; one capital leaves the production process as the other capital returns into the production process. This intertwining and coalescence of the processes of reproduction or circulation of different capitals is on the one hand necessitated by the division of labour, on the other hand it is accidental; and thus the definition of the content of crisis is already fuller.

Secondly, however, with regard to the possibility of crisis arising from the form of money as means of payment, it appears that capital may provide a much more concrete basis for turning this possibility into reality. For example, the weaver must pay for the whole of the constant capital whose elements have been produced by the spinner, the flax-grower, the machine-builder, the iron and timber manufacturer, the producer of coal etc. In so far as these latter produce constant capital that only enters into the production of constant capital, without entering into the cloth, the final commodity, they replace each other’s means of production through the exchange of capital. Supposing the ||715| weaver now sells the cloth for £ 1,000 to the merchant but in return for a bill of exchange so that money figures as means of payment. The weaver for his part hands over the bill of exchange to the banker, to whom he may thus be repaying a debt or, on the other hand, the banker may negotiate the bill for him. The flax-grower has sold to the spinner in return for a bill of exchange, the spinner to the weaver, ditto the machine manufacturer to the weaver, ditto the iron and timber manufacturer to the machine manufacturer, ditto the coal producer to the spinner, weaver, machine manufacturer, iron and timber supplier. Besides, the iron, coal, timber and flax producers have paid one another with bills of exchange. Now if the merchant does not pay, then the weaver cannot pay his bill of exchange to the banker.

The flax-grower has drawn on the spinner, the machine manufacturer on the weaver and the spinner. The spinner cannot pay because the weaver cannot pay, neither of them pay the machine manufacturer, and the latter does not pay the iron, timber or coal supplier. And all of these in turn, as they cannot realise the value of their commodities, cannot replace that portion of value which is to replace their constant capital. Thus the general crisis comes into being. This is nothing other than the possibility of crisis described when dealing with money as a means of payment; but here—in capitalist production—we can already see the connection between the mutual claims and obligations, the sales and purchases, through which the possibility can develop into actuality.

In any case: If purchase and sale do not get bogged down, and therefore do not require forcible adjustment—and, on the other hand, money as means of payment functions in such a way that claims are mutually settled, and thus the contradiction inherent in money as a means of payment is not realised—if therefore neither of these two abstract forms of crisis become real, no crisis exists. No crisis can exist unless sale and purchase are separated from one another and come into conflict, or the contradictions contained in money as a means of payment actually come into play; crisis, therefore, cannot exist without manifesting itself at the same time in its simple form, as the contradiction between sale and purchase and the contradiction of money as a means-of payment. But these are merely forms, general possibilities of crisis, and hence also forms, abstract forms, of actual crisis. In them, the nature of crisis appears in its simplest forms, and, in so far as this form is itself the simplest content of crisis, in its simplest content. But the content is not yet substantiated. Simple circulation of money and even the circulation of money as a means of payment—and both come into being long before capitalist production, while there are no crises—are possible and actually take place without crises. These forms alone, therefore, do not explain why their crucial aspect becomes prominent and why the potential contradiction contained in them becomes a real contradiction.

This shows how insipid the economists are who, when they are no longer able to explain away the phenomenon of overproduction and crises, are content to say that these forms contain the possibility of crises, that it is therefore accidental whether or not crises occur and consequently their occurrence is itself merely a matter of chance.

The contradictions inherent in the circulation of commodities, which are further developed in the circulation of money—and thus, also, the possibilities of crisis—reproduce themselves, automatically, in capital, since developed circulation of commodities and of money, in fact, only takes place on the basis of capital.

But now the further development of the potential crisis has to be traced—the real crisis can only be educed from the real movement of capitalist production, competition and credit—in so far as crisis arises out of the special aspects of capital which are peculiar to it as capital, and not merely comprised in its existence as commodity and money.

The mere (direct) production process of capital in itself, cannot add anything new in this context. In order to exist at all, its conditions are presupposed. The first section dealing with capital—the direct process of production—does not contribute any new element of crisis. Although it does contain such an element, because the production process implies appropriation and hence production of surplus-value. But this cannot be shown when dealing with the production process itself, for the latter is not concerned with the realisation either of the reproduced value or of the surplus-value.

This can only emerge in the circulation process which is in itself also a process of reproduction.

Furthermore it is necessary to describe the circulation or reproduction process before dealing with the already existing capital—capital and profit—since we have to explain, not only how capital produces, but also how capital is produced. But the actual movement starts from the existing capital—i.e., the actual movement denotes developed capitalist production, which starts from and presupposes its own basis. The process of reproduction and the predisposition to crisis which is further developed in it, are therefore only partially described under this heading and require further elaboration in the chapter on “Capital and Profit”.

The circulation process as a whole or the reproduction process of capital as a whole is the unity of its production phase and its circulation phase, so that it comprises both these processes or phases. Therein lies a further developed possibility or abstract form of crisis. The economists who deny crises consequently assert only the unity of these two phases. If they were only separate, without being a unity, then their unity could not be established by force and there could be no crisis. If they were only a unity without being separate, then no violent separation would be possible implying a crisis. Crisis is the forcible establishment of unity between elements that have become independent and the enforced separation from one another of elements which are essentially one.

11. On the Forms of Crisis

Therefore:

1. The general possibility of crisis is given in the process of metamorphosis of capital itself, and in two ways: in so far as money functions as means of circulation, [the possibility of crisis lies in] the separation of purchase and sale; and in so far as money functions as means of payment, it has two different aspects, it acts as measure of value and as realisation of value. These two aspects [may] become separated. If in the interval between them the value has changed, if the commodity at the moment of its sale is not worth what it was worth at the moment when money was acting as a measure of value and therefore as a measure of the reciprocal obligations, then the obligation cannot be met from the proceeds of the sale of the commodity, and therefore the whole series of transactions which retrogressively depend on this one transaction, cannot be settled. If even for only a limited period of time the commodity cannot be sold then, although its value has not altered, money cannot function as means of payment, since it must function as such in a definite given period of time. But as the same sum of money acts for a whole series of reciprocal transactions and obligations here, inability to pay occurs not only at one, but at many points, hence a crisis arises.

These are the formal possibilities of crisis. The form mentioned first is possible without the latter—that is to say, crises are possible without credit, without money functioning as a means of payment. But the second form is not possible without the first— that is to say, without the separation between purchase and sale. But in the latter case, the crisis occurs not only because the commodity is unsaleable, but because it is not saleable within a particular period of time, and the crisis arises and derives its character not only from the unsaleability of the commodity, but from the non-fulfilment of a whole series of payments which depend on the sale of this particular commodity within this particular period of time. This is the characteristic form of money crises.

If the crisis appears, therefore, because purchase and sale become separated, it becomes a money crisis, as ‘soon as money has developed as means of payment, and this second form of crisis follows as a matter of course, when the first occurs. In investigating why the general possibility of crisis turns into a real crisis, in investigating the conditions of crisis, it is therefore quite superfluous to concern oneself with the forms of crisis which arise out of the development of money as means of payment. This is precisely why economists like to suggest that this obvious form is the cause of crises. (In so far as the development of money as means of payment is linked with the development of credit and of excess credit the causes of the latter have to be examined, but this is not yet the place to do it.)

2. In so far as crises arise from changes in prices and revolutions in prices, which do not coincide with changes in the values of commodities, they naturally cannot be investigated during the examination of capital in general, in which the prices of commodities are assumed to be identical with the values of commodities.

3. The general possibility of crisis is the formal metamorphosis of capital itself, the separation, in time and space, of purchase and sale. But this is never the cause of the crisis. For it is nothing but the most general form of crisis, i.e., the crisis itself in its most generalised expression. But it cannot be said that the abstract form of crisis is the cause of crisis. If one asks what its cause is, one wants to know why its abstract form, the form of its possibility, turns from possibility into actuality.

4. The general conditions of crises, in so far as they are independent of price fluctuations (whether these are linked with the credit system or not) as distinct from fluctuations in value, must be explicable from the general conditions of capitalist production.

(A crisis can arise: 1, in the course of the reconversion [of money] into productive capital; 2. through changes in the value of the elements of productive capital, particularly of raw material, for example when there is a decrease in the quantity of cotton harvested. Its value will thus rise. We are not as yet concerned with prices here but with values.)

First Phase. The reconversion of money into capital. A definite level of production or reproduction is assumed. Fixed capital can be regarded here as given, as remaining unchanged and not entering into the process of the creation of value. Since the reproduction of raw material is not dependent solely on the labour employed on it, but on the productivity of this labour which is bound up with natural conditions, it is possible for the volume, ||XIV-771a| the amount of the product of the same quantity of labour, to fall (as a result of bad harvests). The value of the raw material therefore rises; its volume decreases, in other words the proportions in which the money has to be reconverted into the various component parts of capital in order to continue production on the former scale, are upset. More must be expended on raw material, less remains for labour, and it is not possible to absorb the same quantity of labour as before. Firstly this is physically impossible, because of the deficiency in raw material. Secondly, it is impossible because a greater portion of the value of the product has to be converted into raw material, thus leaving less for conversion into variable capital. Reproduction cannot be repeated on the same scale. A part of fixed capital stands idle and a part of the workers is thrown out on the streets. The rate of profit falls because the value of constant capital has risen as against that of variable capital and less variable capital is employed. The fixed charges—interest, rent—which were based on the anticipation of a constant rate of profit and exploitation of labour, remain the same and in part cannot be paid. Hence crisis. Crisis of labour and crisis of capital. This is therefore a disturbance in the reproduction process due to the increase in the value of that part of constant capital which has to be replaced out of the value of the product. Moreover, although the rate of profit is decreasing, there is a rise in the price of the product. If this product enters into other spheres of production as a means of production, the rise in its price will result in the same disturbance in reproduction in these spheres. If it enters into general consumption as a means of subsistence, it either enters also into the consumption of the workers or not. If it does so, then its effects will be the same as those of a disturbance in variable capital, of which we shall speak later. But in so far as it enters into general consumption it may result (if its consumption is not reduced) in a diminished demand for other products and consequently prevent their reconversion into money at their value, thus disturbing the other aspect of their reproduction— not the reconversion of money into productive capital but the reconversion of commodities into money. In any case, the volume of profits and the volume of wages is reduced in this branch of production thereby reducing a part of the necessary returns from the sale of commodities from other branches of production.

Such a shortage of raw material may, however, occur not only because of the influence of harvests or of the natural productivity of the labour which supplies the raw material. For if an excessive portion of the surplus-value, of the additional capital, is laid out in machinery etc, in a particular branch of production, then, although the raw material would have been sufficient for the old level of production, it will be insufficient for the new. This therefore arises from the disproportionate conversion of additional capital into its various elements. It is a case of over-production of fixed capital and gives rise to exactly the same phenomena as occur in the first case. (See the previous page.)

Or they [the crises] are due to an over-production of fixed capital and therefore a relative under-production of circulating capital.

Since fixed capital, like circulating, consists of commodities, it is quite ridiculous that the same economists who admit the over-production of fixed capital, deny the over-production of commodities.

5. Crises arising from disturbances in the first phase of reproduction: that is to say, interrupted conversion of commodities into money or interruption of sale. In the case of crises of the first sort [which result from the rise in the price of raw materials] the crisis arises from interruptions in the flowing back of the elements of productive capital.

12. Contradictions Between Production and Consumption under Conditions of Capitalism. Over-production of the Principal Consumer Goods Becomes General Over-production

Before embarking on an investigation of the new forms of crisis, we shall resume our consideration of Ricardo and the above example.

So long as the owner of the weaving-mill reproduces and accumulates, his workers, too, purchase a part of his product, they spend a part of their wages on calico. Because he produces, they have the means to purchase a part of his product and thus to some extent give him the means to sell it. The worker can only buy—he can represent a demand only for—commodities which enter into individual consumption, for he does not himself turn his labour to account nor does he himself possess the means to do so—the instruments of labour and materials of labour. This already, therefore, excludes the majority of producers, the workers themselves, as consumers, buyers [of many commodities], where capitalist production prevails. They buy no raw material and no instruments of labour; they buy only means of subsistence, commodities which enter directly into individual consumption. Hence nothing is more ridiculous than to speak of the identity of producers and consumers, since for an extraordinarily large number of branches of production—all those that do not supply articles for direct consumption—the mass of those who participate in production are entirely excluded from the purchase of their own products. They are never direct consumers or buyers of this large part of their own products, although they pay a portion of the value of these products in the articles of consumption that they buy. This also shows the ambiguity of the word consumer and how wrong it is to identify it with the word buyer. As regards industrial consumption, it is precisely the workers who consume machinery and raw material, using them up in the labour-process. But they do not use them up for themselves and they are therefore not buyers of them. Machinery and raw material are for them neither use-values nor commodities, but objective conditions of a process of which they themselves are the subjective conditions.

It may, however, be said that their’ employer represents them in the purchase of means of production and raw materials. But he represents them under different conditions from those in which they would represent themselves on the market. He must sell a quantity of commodities which represents surplus-value, unpaid labour. They [the workers] would only have to sell the quantity of commodities which would reproduce the value advanced in production—the value of the means of production, the raw materials and the wages. He therefore requires a wider market than they would require. It depends, moreover, on him and not on them, whether he considers the conditions of the market sufficiently favourable to begin reproduction.

They are therefore producers without being consumers—even when no interruption of the reproduction process takes place—in relation to all articles which have to be consumed not individually but industrially.

Thus nothing is more absurd as a means of denying crises, than the assertion that the consumers (buyers) and producers (sellers) are identical in capitalist production. They are entirely distinct categories. In so far as the reproduction process takes place, this identity can be asserted only for one out of 3,000 producers, namely, the capitalist. On the other hand, it is equally wrong to say that the consumers are producers. The landlord does not produce (rent), and yet he consumes. The same applies to all monied interests.

The apologetic phrases used to deny crises are important in so far as they always prove the opposite of what they are meant to prove. In order to deny crises, they assert unity where there is conflict and contradiction. They are therefore important in so far as one can say they prove that there would be no crises if the contradictions which they have erased in their imagination, did not exist in fact. But in reality crises exist because these contradictions exist. Every reason which they put forward against crisis is an exorcised contradiction, and, therefore, a real contradiction, which can cause crises. The desire to convince oneself of the non-existence of contradictions, is at the same time the expression of a pious wish that the contradictions, which are really present, should not exist.

What the workers in fact produce, is surplus-value. So long as they produce it, they are able to consume. As soon as they cease [to produce it], their consumption ceases, because their production ceases. But that they are able to consume is by no means due to their having produced an equivalent for their consumption. On the contrary, as soon as they produce merely such an equivalent, their consumption ceases, they have no equivalent to consume. Their work is either stopped or curtailed, or at all events their wages are reduced. In the latter case—if the level of production remains the same—they do not consume an equivalent of what they produce. But they lack these means not because they do not produce enough, but because they receive too little of their product for themselves.

By reducing these relations simply to those of consumer and producer, one leaves out of account that the wage-labourer who produces and the capitalist who produces are two producers of a completely different kind, quite apart from the fact that some consumers do not produce at all. Once again, a contradiction is denied, by abstracting from a contradiction which really exists in production. The mere relationship of wage-labourer and capitalist implies:

1. that the majority of the producers (the workers) are nonconsumers (non-buyers) of a very large part of their product, namely, of the means of production and the raw material;

2. that the majority of the producers, the workers, can consume an equivalent for their product only so long as they produce more than this equivalent, that is, so long as they produce surplus-value or surplus-product. They must always be over-producers, produce over and above their needs, in order to be able to be consumers or buyers within the limits of their needs.

As regards this class of producers, the unity between production and consumption is, at any rate prima facie, false.

When Ricardo says that the only limit to demand is production itself, and that this is limited by capital, then this means, in fact, when stripped of false assumptions, nothing more than that capitalist production finds its measure only in capital; in this context, however, the term capital also includes the labour-power which is incorporated in (bought by) capital as one of its conditions of production. The question is whether capital as such is also the limit for consumption. At any rate, it is so in a negative sense, that is, more cannot be consumed than is produced. But the question is, whether this applies in a positive sense too, whether—on the basis of capitalist production—as much can and must be consumed as is produced. Ricardo’s proposition, when correctly analysed, says the very opposite of what it is meant to say—namely, that production takes place without regard to the existing limits to consumption, but is limited only by capital itself. And this is indeed characteristic of this mode of production.

Thus according to the assumption, the market is glutted, for instance with cotton cloth, so that part of it remains unsold or all of it, or it can only be sold well below its price. (For the time being, we shall call it value, because while we are considering circulation or the reproduction process, we are still concerned with value and not yet with cost-price, even less with market-price.)

It goes without saying that, in the whole of this observation. it is not denied that too much may be produced in individual spheres and therefore too little in others; partial crises can thus arise from disproportionate production (proportionate production is, however, always only the result of disproportionate production on the basis of competition) and a general form of this disproportionate production may be over-production of fixed capital, or on the other hand, over-production of circulating capital.* Just as it is a condition for the sale of commodities at their value, that they contain only the socially necessary labour-time, so it is for an entire sphere of production of capital, that only the necessary part of the total labour-time of society is used in the particular sphere, only the labour-time which is required for the satisfaction of social need (demand). If more is used, then, even if each individual commodity only contains the necessary labour-time, the total contains more than the socially necessary labour-time; in the same way, although the individual commodity has use-value, the total sum of commodities loses some of its use-value under the conditions assumed.

However, we are not speaking of crisis here in so far as it arises from disproportionate production, that is to say, the disproportion in the distribution of social labour between the individual spheres of production. This can only be dealt with in connection with the competition of capitals. In that context it has already been stated that the rise or fall of market-value which is caused by this disproportion, results in the withdrawal of capital from one branch of production and its transfer to another, the migration of capital from one branch of production to another. This equalisation itself however already implies as a precondition the opposite of equalisation and may therefore comprise crisis; the crisis itself may be a form of equalisation. Ricardo etc. admit this form of crisis.

When considering the production process we saw that the whole aim of capitalist production is appropriation of the greatest possible amount of surplus-labour, in other words, the realisation of the greatest possible amount of immediate labour-time with the given capital, be it through the prolongation of the labour-day or the reduction of the necessary labour-time, through the development of the productive power of labour by means of cooperation, division of labour, machinery etc., in short, large-scale production, i.e., mass production. It is thus in the nature of capitalist production, to produce without regard to the limits of the market.

During the examination of reproduction, it is, in the first place, assumed that the method of production remains the same and it remains the same, moreover, for a period while production expands. The volume of commodities produced is increased in this case, because more capital is employed and not because capital is employed more productively. But the mere quantitative increase in capital at the same time implies that its productive power grows. If its quantitative increase is the result of the development of productive power, then the latter in turn develops on the assumption of a broader, extended capitalist basis. Reciprocal interaction takes place in this case. Reproduction on an extended basis, accumulation, even if originally it appears only as a quantitative expansion of production—the use of more capital under the same conditions of production—at a certain point, therefore, always represents also a qualitative expansion in the form of greater productivity of the conditions under which reproduction is carried out. Consequently the volume of products increases not only in simple proportion to the growth of capital in expanded reproduction—accumulation.

Now let us return to our example of calico.

The stagnation in the market, which is glutted with cotton cloth, hampers the reproduction process of the weaver. This disturbance first affects his workers. Thus they are now to a smaller extent, or not at all, consumers of his commodity—cotton cloth—and of other commodities which entered into their consumption. It is true, that they need cotton cloth, but they cannot buy it because they have not the means, and they have not the means because they cannot continue to produce and they cannot continue to produce because too much has been produced, too much cotton cloth is already on the market. Neither Ricardo’s advice “to increase their production”, nor his alternative “to produce something else” can help them. They now form a part of the temporary surplus population, of the surplus production of workers, in this case of cotton producers, because there is a surplus production of cotton fabrics on the market.

But apart from the workers who are directly employed by the capital invested in cotton weaving, a large number of other producers are hit by this interruption in the reproduction process of cotton: spinners, cotton-growers, engineers (producers of spindles, looms etc.), iron and coal producers and so on. Reproduction in all these spheres would also be impeded because the reproduction of cotton cloth is a condition for their own reproduction. This would happen even if they had not over-produced in their own spheres, that is to say, had not produced beyond the limit set and justified by the cotton industry when it was working smoothly. All these industries have this in common, that their revenue (wages and profit, in so far as the latter is consumed as revenue and not accumulated) is not consumed by them in their own product but in the product of other spheres, which produce articles of consumption, calico among others. Thus the consumption of and the demand for calico fall just because there is too much of it on the market. But this also applies to all other commodities on which, as articles of consumption, the revenue of these indirect producers of cotton is spent. Their means for buying calico and other articles of consumption shrink, contract, because there is too much calico on the market. This also affects other commodities (articles of consumption). They are now, all of a sudden, relatively over-produced, because the means with which to buy them and therefore the demand for them, have contracted. Even if there has been no over-production in these spheres, now they are over-producing.

If over-production has taken place not only in cotton, but also in linen, silk and woollen fabrics, then it can be understood how over-production in these few, but leading articles, calls forth a more or less general (relative) over-production on the whole market. On the one hand there is a superabundance of all the means of reproduction and a superabundance of all kinds of unsold commodities on the market. On the other hand bankrupt capitalists and destitute, starving workers.

This however is a two-edged argument. If it is easily understood how over-production of some leading articles of consumption must bring in its wake the phenomenon of a more or less general over-production, it is by no means clear how over-production of these articles can arise. For the phenomenon of general over-production is derived from the interdependence not only of the workers directly employed in these industries, but of all branches of industries which produce the elements of their products, the various stages of their constant capital. In the latter branches of industry, over-production is an effect. But whence does it come in the former? For the latter [branches of industry] continue to produce so long as the former go on producing, and along with this continued production, a general growth in revenue, and therefore in their own consumption, seems assured.

13. The Expansion of the Market Does Not Keep in Step with the Expansion of Production. The Ricardian Conception That an Unlimited Expansion of Consumption and of the Internal Market Is Possible

If one were to answer the question by pointing out that the constantly expanding production <it expands annually for two reasons; firstly because the capital invested in production is continually growing; secondly because the capital is constantly used more productively; in the course of reproduction and accumulation, small improvements are continuously building up, which eventually alter the whole level of production. There is a piling up of improvements, a cumulative development of productive powers.> requires a constantly expanding market and that production expands more rapidly than the market, then one would merely have used different terms to express the phenomenon which has to be explained—concrete terms instead of abstract terms. The market expands more slowly than production; or in the cycle through which capital passes during its reproduction—a cycle in which it is not simply reproduced but reproduced on an extended scale, in which it describes not a circle but a spiral—there comes a moment at which the market manifests itself as too narrow for production. This occurs at the end of the cycle. But it merely means: the market is glutted. Over-production is manifest. If the expansion of the market had kept pace with the expansion of production there would be no glut of the market, no over-production.

However, the mere admission that the market must expand with production, is, on the other hand, again an admission of the possibility of over-production, for the market is limited externally in the geographical sense, the internal market is limited as compared with a market that is both internal and external, the latter in turn is limited as compared with the world market, which however is, in turn, limited at each moment of time, [though] in itself capable of expansion. The admission that the market must expand if there is to be no over-production, is therefore also an admission that there can be over-production. For it is then possible—since market and production are two independent factors—that the expansion of one does not correspond with the expansion of the other; that the limits of the market are not extended rapidly enough for production, or that new markets— new extensions of the market—may be rapidly outpaced by production, so that the expanded market becomes just as much a barrier as the narrower market was formerly.

Ricardo is therefore consistent in denying the necessity of an expansion of the market simultaneously with the expansion of production and growth of capital. All the available capital in a country can also be advantageously employed in that country. Hence he polemises against Adam Smith, who on the one hand put forward his (Ricardo’s) view and, with his usual rational instinct, contradicted it as well. Adam Smith did not yet know the phenomenon of over-production, and crises resulting from over-production. What he knew were only credit and money crises, which automatically appear, along with the credit and banking system. In fact he sees in the accumulation of capital an unqualified increase in the general wealth and well-being of the nation. On the other hand, he regards the mere fact that the internal market develops into an external, colonial and world market, as proof of a so-to-speak relative (potential) over-production in the internal market. It is worth quoting Ricardo’s polemic against him at this point:

“When merchants engage their capitals in foreign trade, or in the carrying trade, it is always from choice, and never from necessity: it is because in that trade their profits will he somewhat greater than in the home trade.

“Adam Smith has justly observed ‘that the desire of food is limited in every man by the narrow capacity of the human stomach’,”

<Adam Smith is very much mistaken here, for he excludes the luxury products of agriculture>

“ ‘but the desire of the conveniences and ornaments of building, dress, equipage, and household furniture, seems to have no limit or certain boundary.”

“Nature” (Ricardo continues) “then has necessarily limited the amount of capital which can at any […] time be profitably engaged in agriculture,”

<Is that why there are nations which export agricultural products? As if it were impossible, despite nature, to sink all possible capital into agriculture in order to produce, in England for example, melons, figs, grapes etc., flowers etc., and birds and game etc. (See, for example, the capital that the Romans put into artificial fish culture alone.) And as if the raw materials of industry were not produced by means of agricultural capital.>

“but she has placed no limits” (as if nature had anything to do with the matter) “to the amount of capital that may be employed in procuring ‘the conveniences and ornaments’ of life. To procure these gratifications in the greatest abundance is the object in view, and it is only because foreign trade, or the carrying trade, will accomplish it better, that men engage in them in preference to manufacturing the commodities required, or a substitute for them, at home. If, however, from peculiar circumstances, we were precluded from engaging capital in foreign trade, or in the carrying trade, we should, though with less advantage, employ it at home; and while there is no limit to the desire of ‘conveniences, ornaments of building, dress, equipage, ||721| and household furniture,’ there can be no limit to the capital that may be employed in procuring them, except that which bounds our power to maintain the workmen who are to produce them.

“Adam Smith, however, speaks of the carrying trade as one, not of choice, but of necessity; as if the capital engaged in it would be inert if not so employed, as if the capital in the home trade could overflow, if not confined to a limited amount. He says, ‘when the capital stock of any country is increased to such a degree, that it cannot be all employed in supplying the consumption, and supporting the productive labour of that particular country’,” (this passage is printed in italics by Ricardo himself> “ ‘the surplus part of it naturally disgorges itself into the carrying trade, and is employed in performing the same offices to other countries’.

“But could not this portion of the productive labour of Great Britain be employed in preparing some other sort of goods, with which something more in demand at home might be purchased? And if it could not, might we not employ this productive labour, though with less advantage, in making those goods in demand at home, or at least some substitute for them? If we wanted velvets, might we not attempt to make velvets; and if we could not succeed, might we not make more cloth, or some other object desirable to us?

“We manufacture commodities, and with them buy goods abroad, because we can obtain a greater quantity” <the qualitative difference does not exist!> “than we could make at home. Deprive us of this trade, and we immediately manufacture again for ourselves. But this opinion of Adam Smith is at variance with all his general doctrines on this subject.” <Ricardo now cites Smith:> “ If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with same part of the produce of our own industry, employed in a way in which we have some advantage. The general industry of the country being always in proportion to the capital which employs it’,” <in very different proportion> (this sentence too is emphasised by Ricardo) “ ‘will not thereby be diminished, but only left to find out the way in which it can be employed with the greatest advantage.’

“Again. ‘Those, therefore, who have the command of more food than they themselves can consume, are always willing to exchange the surplus, or, what is the same thing, the price of it, for gratifications of another kind. What is over and above satisfying the limited desire, is given for the amusement of those desires which cannot be satisfied, but seem to be altogether endless. The poor, in order to obtain food, exert themselves to gratify those fancies of the rich; and to obtain it more certainly, they vie with one another in the cheapness and perfection of their work. The number of workmen increases with the increasing quantity of food, or with the growing improvement and cultivation of the lands; and as the nature of their business admits of the utmost subdivisions of labours, the quantity of materials which they can work up increases in a much greater proportion than their numbers. Hence arises a demand for every sort of material which human invention can employ, either usefully or ornamentally, in building, dress, equipage, or household furniture; for the fossils and minerals contained in the bowels of the earth, the precious metals, and the precious stones.’

“It follows then from these admissions, that there is no limit to demand— no limit to the employment of capital while it yields any profit, and that however abundant capital may become, there is no other adequate reason for a fall of profit but a rise of wages, and further it may be added, that the only adequate and permanent cause for the rise of wages is the increasing difficulty of providing food and necessaries for the increasing number of workmen” (l.c., pp. 344-48).

14. The Contradiction Between the Impetuous Development of the Productive Powers and the Limitations of Consumption Leads to Over-production. The Theory of the Impossibility of General Over-production Is Essentially Apologetic in Tendency

The word over-production in itself leads to error. So long as the most urgent needs of a large part of society are not satisfied, or only the most immediate needs are satisfied, there can of course be absolutely no talk of an over-production of products— in the sense that the amount of products is excessive in relation to the need for them. On the contrary, it must be said that on the basis of capitalist production, there is constant under-production in this sense. The limits to production are set by the profit of the capitalist and in no way by the needs of the producers. But over-production of products and over-production of commodities are two entirely different things. If Ricardo thinks that the commodity form makes no difference to the product, and furthermore, that commodity circulation differs only formally from barter, that in this context the exchange-value is only a fleeting form of the exchange of things, and that money is therefore merely a formal means of circulation—then this in fact is in line with his presupposition that the bourgeois mode of production is the absolute mode of production, hence it is a mode of production without any definite specific characteristics, its distinctive traits are merely formal. He cannot therefore admit that the bourgeois mode of production contains within itself a barrier to the free development of the productive forces, a barrier which comes to the surface in crises and, in particular, in over-production—the basic phenomenon in crises.

Ricardo saw from the passages of Adam Smith, which he quotes, approves, and therefore also repeats, that the limitless “desire” for all kinds of use-values is always satisfied on the basis of a state of affairs in which the mass of producers remains more or less restricted to necessities—”food” and other “necessaries”—that consequently this great majority of producers remains more or less excluded from the consumption of wealth— in so far as wealth goes beyond the bounds of the necessary means of subsistence.

This was indeed also the case, and to an even higher degree, in the ancient mode of production which depended on slavery. But the ancients never thought of transforming the surplus-product into capital. Or at least only to a very limited extent. (The fact that the hoarding of treasure in the narrow sense was widespread among them shows how much surplus-product lay completely idle.) They used a large part of the surplus-product for unproductive expenditure on art, religious works and public works. Still less was their production directed to the release and development of the material productive forces—division of labour, machinery, the application of the powers of nature and science to private production. In fact, by and large, they never went beyond handicraft labour. The wealth which they produced for private consumption was therefore relatively small and only appears great because it was amassed in the hands of a few persons, who, incidentally, did not know what to do with it. Although, therefore, there was no over-production among the ancients, there was over-consumption by the rich, which in the final periods of Rome and Greece turned into mad extravagance. The few trading peoples among them lived partly at the expense of all these essentially poor nations. It is the unconditional development of the productive forces and therefore mass production on the basis of a mass of producers who are confined within the bounds of the necessary means of subsistence on the one hand and, on the other, the barrier set up by the capitalists’ profit, which the basis of modern over-production.

All the objections which Ricardo and others raise against overproduction etc. rest on the fact that they regard bourgeois production either as a mode of production in which no distinction exists between purchase and sale—direct barter—or as social production, implying that society, as if according to a plan, distributes its means of production and productive forces in the degree and measure which is required for the fulfilment of the various social needs, so that each sphere of production receives the quota of social capital required to satisfy the corresponding need. This fiction arises entirely from the inability to grasp the specific form of bourgeois production and this inability in turn arises from the obsession that bourgeois production is production as such, just like a man who believes in a particular religion and sees it as the religion, and everything outside of it only as false religions.

On the contrary, the question that has to be answered is: since, on the basis of capitalist production, everyone works for himself and a particular labour must at the same time appear as its opposite, as abstract general labour and in this form as social labour—how is it possible to achieve the necessary balance and interdependence of the various spheres of production, their dimensions and the proportions between them, except through the constant neutralisation of a constant disharmony? This is admitted by those who speak of adjustments through competition, for these adjustments always presuppose that there is something to adjust, and therefore that harmony is always only a result of the movement which neutralises the existing disharmony.

That is why Ricardo admits that a glut of certain commodities is possible. What is supposed to be impossible is only a simultaneous general glut of the market. The possibility of overproduction in any particular sphere of production is therefore not denied. It is the simultaneity of this phenomenon for all spheres of production which is said to be impossible and therefore makes impossible [general] over-production and thus a general glut of the market, (This expression must always be taken cum grano salis, since in times of general over-production, the over-production in some spheres is always only the result, the consequence, of over-production in the leading articles of commerce; [it is] always only relative, i.e., over-production because over-production exists in other spheres.)

Apologetics turns this into its very opposite. [There is only] over-production in the leading articles of commerce, in which alone, active over-production shows itself—these are on the whole articles which can only be produced on a mass scale and by factory methods (also in agriculture), because over-production exists in those articles in which relative or passive overproduction manifests itself. According to this, over-production only exists because over-production is not universal. The relativity of over-production—that actual over-production in a few spheres calls forth over-production in others—is expressed in this way: There is no universal over-production, because if overproduction were universal, all spheres of production would retain the same relation to one another; therefore universal overproduction is proportional production which excludes over-production. And this is supposed to be an argument against universal over-production. ||723| For, since universal over-production in the absolute sense would not be over-production but only a greater than usual development of the productive forces in all spheres of production, it is alleged that actual over-production, which is precisely not this non-existent, self-abrogating overproduction, does not exist—although it only exists because it is not this.

If this miserable sophistry is more closely examined, it amounts to this: Suppose, that there is over-production in iron, cotton goods, linen, silk, woollen cloth etc.; then it cannot be said, for example, that too little coal has been produced and that this is the reason for the above over-production. For that over-production of iron etc. involves an exactly similar over-production of coal, as, say, the over-production of woven cloth does of yarn. <Over-production of yarn as compared with cloth, iron as compared with machinery, etc. could occur. This would always be a relative over-production of constant capital.> There cannot, therefore, be any question of the under-production of those articles whose over-production is implied because they enter as an element, raw material, auxiliary material or means of production, into those articles (the “particular commodity of which too much may be produced, of which there may be such a glut in the market, as not to repay the capital expended on it” [l.c., pp. 341-42], whose positive over-production is precisely the fact to be explained. Rather, it is a question of other articles which belong directly to [other] spheres of production and [can] neither subsumed under the leading articles of commerce which, according to the assumption, have been over-produced, nor be attributed to spheres in which, because they supply the intermediate product for the leading articles of commerce, production must have reached at least the same level as in the final phases of the product—although there is nothing to prevent production in those spheres from having gone even further ahead thus causing an over-production within the over-production. For example, although sufficient coal must have been produced in order to keep going all those industries into which coal enters as necessary condition of production, and therefore the over-production of coal is implied in the over-production of iron, yarn etc. (even if coal was produced only in proportion to the production of iron and yarn [etc.]), it is also possible that more coal was produced than was required even for the over-production of iron, yarn etc. This is not only possible, but very probable. For the production of coal and yarn and of all other spheres of production which produce only the conditions or earlier phases of a product to be completed in another sphere, is governed not by the immediate demand, by the immediate production or reproduction, but by the degree, measure, proportion in which these are expanding. And it is self-evident that in this calculation, the target may well be overshot. Thus not enough has been produced of other articles such as, for example, pianos, precious stones etc., they have been under-produced. <There are, however, also cases where the over-production of non-leading articles is not the result of overproduction, but where, on the contrary, under-production is the cause of over-production, as for instance when there has been a failure in the grain crop or the cotton crop.>

The absurdity of this statement becomes particularly marked if it is applied to the international scene, as it has been by Say and others after him. For instance, that England has not over-produced but Italy has under-produced. There would have been no over-production, if in the first place Italy had enough capital to replace the English capital exported to Italy in the form of commodities; and secondly if Italy had invested this capital in such a way that it produced those particular articles which are required by English capital—partly in order to replace itself and partly in order to replace the revenue yielded by it. Thus the fact of the actually existing over-production in England—in relation to the actual production in Italy—would not have existed, but only the fact of imaginary under-production in Italy; imaginary because it ||724| presupposes a capital in Italy and a development of the productive forces that do not exist there, and secondly because it makes the equally utopian assumption, that this capital which does not exist in Italy, has been employed in exactly the way required to make English supply and Italian demand, English and Italian production, complementary to each other. In other words, this means nothing but: there would be no overproduction, if demand and supply corresponded to each other, if the capital were distributed in such proportions in all spheres of production, that the production of one article involved the consumption of the other, and thus its own consumption. There would be no over-production, if there were no over-production. Since, however, capitalist production can allow itself free rein only in certain spheres, under certain conditions, there could be no capitalist production at all if it had to develop simultaneously and evenly in all spheres. Because absolute over-production takes place in certain spheres, relative over-production occurs also in the spheres where there has been no over-production.

This explanation of over-production in one field by underproduction in another field therefore means merely that if production were proportionate, there would be no over-production. The same could be said if demand and supply corresponded to each other, or if all spheres provided equal opportunities for capitalist production and its expansion—division of labour, machinery, export to distant markets etc., mass production, i.e., if all countries which traded with one another possessed the same capacity for production (and indeed for different and complementary production). Thus over-production takes place because all these pious wishes are not fulfilled. Or, in even more abstract form: There would be no over-production in one place, if overproduction took place to the same extent everywhere. But there is not enough capital to over-produce so universally, and therefore there is partial over-production.

Let us examine this fantasy more closely:

It is admitted that there can be over-production in each particular industry. The only circumstance which could prevent over production in all industries simultaneously is, according to the assertions made, the fact that commodity exchanges against commodity—i.e., recourse is taken to the supposed conditions of barter. But this loop-hole is blocked by the very fact that trade [under capitalist conditions] is not barter, and that therefore the seller of a commodity is not necessarily at the same time the buyer of another. This whole subterfuge then rests on abstracting from money and from the fact that we are not concerned with the exchange of products, but with the circulation of commodities, an essential part of which is the separation of purchase and sale.

<The circulation of capital contains within itself the possibilities of interruptions. In the reconversion of money into its conditions of production, for example, it is not only a question of transforming money into the same use-values (in kind), but for the repetition of the reproduction process [it is] essential that these use-values can again be obtained at their old value (at a lower value would of course be even better). A very significant part of these elements of reproduction, which consists of raw materials, can however rise in price for two reasons. Firstly, if the instruments of production increase more rapidly than the amount of raw materials that can be provided at the given time. Secondly, as a result of the variable character of the harvests. That is why weather conditions, as Tooke rightly observes, play such an important part in modern industry. (The same applies to the means of subsistence in relation to wages.) The reconversion of money into commodity can thus come up against difficulties and can create the possibilities of crisis, just as well as can the conversion of commodity into money. When one examines simple circulation—not the circulation of capital—these difficulties do not arise.> (There are, besides, a large number of other factors, conditions, possibilities of crises, which can only be examined when considering the concrete conditions, particularly the competition of capitals and credit.)

[b]The over-production of commodities is denied but the over-production of capital is admitted. Capital itself however consists of commodities or, in so far as it consists of money, it must be reconverted into commodities of one kind or another, in order to be able to function as capital. What then does overproduction of capital mean? Over-production of value destined to produce surplus-value or, if one considers the material content, over-production of commodities destined for reproduction—that is, reproduction on too large a scale, which is the same as over-production pure and simple.

Defined more closely, this means nothing more than that too much has been produced for the purpose of enrichment, or that too great a part of the product is intended not for consumption as revenue, but for making more money (for accumulation): not to satisfy the personal needs of its owner, but to give him money, abstract social riches and capital, more power over the labour of others, i.e., to increase this power. This is what one side says. (Ricardo denies it.) And the other side, how does it explain the over-production of commodities? By saying that production is not sufficiently diversified, that certain articles of consumption have not been produced in sufficiently large quantities. That it is not a matter of industrial consumption is obvious, for the manufacturer who over-produces linen, thereby necessarily increases his demand for yarn, machinery, labour etc. It is therefore a question of personal consumption. Too much linen has been produced, but perhaps too few oranges. Previously the existence of money was denied, in order to show [that there was no] separation between sale and purchase. Here the existence of capital is denied, in order to transform the capitalists into people who carry out the simple operation C—M—C and who produce for individual consumption and not as capitalists with the aim of enrichment, i.e., the reconversion of part of the surplus-value into capital. But the statement that there is too much capital, after all means merely that too little is consumed as revenue, and that more cannot be consumed in the given conditions. (Sismondi.) Why does the producer of linen demand from the producer of corn, that he should consume more linen, or the latter demand that the linen manufacturer should consume more corn? Why does the man who produces linen not himself convert a larger part of his revenue (surplus-value) into linen and the farmer into corn? So far as each individual is concerned, it will be admitted that his desire for capitalisation (apart from the limits of his needs) prevents him from doing this. But for all of them collectively, this is not admitted.

(We are entirely leaving out of account here that element of crises which arises from the fact that commodities are reproduced more cheaply than they were produced. Hence the depreciation of the commodities on the market.)

In world market crises, all the contradictions of bourgeois production erupt collectively; in particular crises (particular in their content and in extent) the eruptions are only sporadical, isolated and one-sided.

Over-production is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labour with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to pay; and this is carried out through continuous expansion of reproduction and accumulation, and therefore constant reconversion of revenue into capital, while on the other hand, the mass of the producers remain tied to the average level of needs, and must remain tied to it according to the nature of capitalist production.

...at the end of this section is interesting. It presages modern imperialism with Smith pointing to the inevitability of it and Ricardo wondering whether it is not "optional".

Of course, colonial trade had already existed for several centuries, but it is the future implications of this trade (and the export of capital) that is being discussed, and this at the very beginning of the Capitalist era.

I'll get through this in the coming days. I am certainly interested...

I've read parts of this before (or probably read most of it, but only remember snippets). In particular, Section 12.

But I am soemwhat confused about this part that you bolded:


During the examination of reproduction, it is, in the first place, assumed that the method of production remains the same and it remains the same, moreover, for a period while production expands. The volume of commodities produced is increased in this case, because more capital is employed and not because capital is employed more productively. But the mere quantitative increase in capital at the same time implies that its productive power grows. If its quantitative increase is the result of the development of productive power, then the latter in turn develops on the assumption of a broader, extended capitalist basis. Reciprocal interaction takes place in this case. Reproduction on an extended basis, accumulation, even if originally it appears only as a quantitative expansion of production—the use of more capital under the same conditions of production—at a certain point, therefore, always represents also a qualitative expansion in the form of greater productivity of the conditions under which reproduction is carried out. Consequently the volume of products increases not only in simple proportion to the growth of capital in expanded reproduction—accumulation.

I think the reason inolves the conditions under which capital is deployed in the general case. But I think I am missing a connection somewhere

My guess: since the goal of the capitalist is always enrichment, transfer of wealth into his own hands (rather than meeting demand with supply), more capital always means increased productive power - mainly achieved by decreasing his costs for labor.

For capital to be deployed, due to competition and constant circulation you MUST have a qualitative increase -- or else it would go elsewhere. So if you have a postiive quantitative expansion it must (considered over a long enough term) also imply a qualitative expansion as well.

But that still seems like a bit of a stretch from what I quoted

Expanded markets could be reason enough for quantitative increase.

Edit: How would transportation fit in? Let's say you are a 19th century capitalist producer of fruit. The development of steam ships would massively expand the market for your perishable product. Now that's a qualitative increase but it ain't yours.

Of course, if yer a Rockefeller or Peabody you just go and buy a steamship line....or the steamship line buys you out, oops, think I'm on to something...

What is that time scale again?

Expanded markets, increased profits in existing markets. Same forces at work.

"The conditions of bourgeois society are too narrow to comprise the wealth created by them. And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented."

I really don't think there is any controversy here (well maybe in the minds of some MR writers).

Part of the reason this is not better known is that it is a criticism of Ricardo's theories on accumulation which also exist elsewhere. The detailed exposition on "crisis" ends up being "hidden in plain sight". The positive aspect of Marx's exposition is remarkably complete... and accurate. Hell, they could give him a fake Nobel for this baby.

I'll return to your quotation when I have a minute.

was that quantitative expansion of production implies qualitative improvement of production. In any case, I think I puzzled out my objection in the edit I just added to that post.

What the worker is being given, in money, for making something, is less than what the capitalist must sell it for, in money, but the value of the item made remains the same. The capitalist is paying less and selling for more - that is the enrichment that is the motivation for production in the first place, the transfer of wealth that is Capitalism. Therefore, at some time the two will be forcibly united, resulting in a crisis. The workers cannot pay the price the capitalist must get. There is not actually over-production - as measured against demand or need - but rather it is relative. The transfer of wealth, expropriated from the worker into the hands of the capitalist, means that inevitably sooner or later people will not be able to buy what the capitalist is selling - regardless of their needs or of demand. It is demand at a certain price that drops off and the supply at a certain price that looks like a glut. The glut, the inevitability of a glut, is certain given the very nature of Capitalism.

How could you stop Capitalism from qualitative improvement of production? The drive will always be in that direction.

I think that "quantitative expansion of production implies qualitative improvement of production" since the two are inevitable features of Capitalism. The more quantitative expansion of production, the more likely for there to be qualitative improvement of production. Expanded production attracts what? Capitalists. And Capitalists do what?

Yeah, that is a hallmark of capitalism. Kneejerk reaction on my part. Wasn't thinking in the appropriate time scale.

I admit to being shocked exactly how in "plain sight" this material is, considering the amount of "scholarship" that agonizes over this question

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"An even stranger aspect of over-production is that the workers, the actual producers of the very commodities which glut the market, are in need of these commodities. It cannot be said here that they should produce things in order to obtain them, for they have produced them and yet they have not got them."

Material that is both fresh to me and somehow easier than that stuff I've already read ten times...I will take note though that again we see here how important definitions are. This time, I note that not about the blanket term 'value' (but thank you, thank you all, I am so glad we've covered that. I really wanted that discussion to occur, and I think perhaps youse guys who had not yet covered it can see why); instead I refer to the excerpt's mention of constant capital and variable capital. These terms were covered in the "What is Value?" thread I put up on SI some time before KOBH finally kicked us off with a proper start by titling his thread the same thing here and actually got the Capital discussion rolling in a sustained way. And thanks KOBH fer that too.

Anyway, we should IMO make sure we have a solid grip on those two terms - C being that capital that is deployed in tools, machines, and materials and the magic stuff V being deployed in the purchase of the labor commodity. Surplus value is worth a brief rehash too = that realized exchange value that has no labor cost associated with it, the source of profit (among other revenue).

I would like to see though a contrast of accumulation with reproduction, although I think I am down with that too, these terms being in their ways analogues to C & V.

Anyway, onward.

Sooo, I think I am down with the excerpt through the comments about Say: "We'll get back to that" is within my mental capacity! Skipping to the paragraph just past Marx's final little snipe at Say, we have a look at the calculus you guys are chatting about downthread in response the post where KOBH tackles post 7 /section 12:


In reproduction, just as in the accumulation of capital, it is not only a question of replacing the same quantity of use-values of which capital consists, on the former scale or on an enlarged scale (in the case of accumulation), but of replacing the value of the capital advanced along with the usual rate of profit (surplus-value).

I say there is a 'calculus' here with a clear choice of terms. Quantitative increase in production is mere algebra, a merely linear increase in the big picture at hand. But if we dig a little deeper, and I think that starts in the snip just above, we see that embedded within this linearly expanding mode of production there is the expansion of appropriation of surplus labor. For every expanding unit of broad production (linearly, of course) there is within an expanding unit of labor/embryonic value which itself is expanding - a part of it paid for and a part of it appropriated without recompense. It is here we leave algebra behind and suddenly are into calculus (would that my memory of it all 25 years ago were more acute so that my analogy could be made more plain). It is here, where the tendency for rising productivity includes labor, that we encounter increase encapsulated within an environ that is itself increasing. Anyway, I hope that sort of points in the direction my thoughts ran when reading the first section and the comments you all put up after KOBH brought up the section 12 excerpt.

Sooo...to then go stand on the other side of the looking glass:


when additional capital is produced at a very rapid rate and its reconversion into productive capital increases the demand for all the elements of the latter to such an extent that actual production cannot keep pace with it; this brings about a rise in the prices of all commodities, which enter into the formation of capital... The interruption of the reproduction process leads to the decrease in variable capital, to a fall in wages and in the quantity of labor employed.

Seems to me that these are the key motions within the discussion of crisis in section 6 and that the rest of the crisis discussion, at least in that section, flow forth from them.

Comments? Corrections? If none about what I have tried to tease out as the core motions, then somebody please expound some more on the parts of the excerpt I've skipped discussing. Those, I think, are where the thread between the theory and the real world is clear as a wrist-thick rope.

What Marx is saying is in the context of a discussion of "reproduction" (or the recreation of the capital that was extended) and "extended reproduction" or "accumulation", which amounts to the original capital extended plus the rate of return it produces. In this case, consider a capital of $100 which produces a 15% return. On the completion of a single circuit, the capital to be invested now amounts to the original $100 plus the $15 which was produced or $115. Now $115 must be extended. If it is not, it ceases to be capital. If it is distributed, it must be reinvested in another sector or it ceases to be capital. If capital is portable across sectors, we are merely expanding the scope across which the same process applies. Production, not only for a single commodity or sector, but for many, increases quantitatively... and this quite independently of what is happening with the "market". To get to this point of market saturation, we need consider nothing more complicated than a quantitative increase of production (of one or many or all commodities - it makes no difference) proportional to the actual increase of capital.

But, now consider Mike's point. Where we have quantitative increase, we just as surely - sooner or later - will get qualitative increases in production due to increased productivity. Thus, the eventual problem is compounded.

Understanding this helps the capitalist not at all because he must still reinvest his expanded capital (he must act "impetuously"). At best, he hopes that he will win the battle to convert all of his extended production back into capital while his competitor will not, i.e. that he will win the battle of competition. In reality, it is never even this clear.

Now consider the current crisis. Capital expanding very quickly is supported by a rapidly expanding global market and the unusual extension of credit to prop up domestic consumption. Then, the handwriting begins to appear on the wall. A brilliant scheme (the 10,000th iteration of such schemes) appears in the credit markets, as new derivatives, which promise to further prop up domestic markets. Meanwhile, additional opportunities appear in hedging commodities to support the still "expanding" market. What is really happening is a gigantic "over-abundance" of capital which has already outstripped the previous markets and is sloshing around waiting to breach the levee. The inevitable happens.

Interestingly, the theory of the supply-siders and the tax breaks guys is exactly wrong. Changing the "equilibrium" (such as it exists and that ain't for long) actually accelerates the rate at which accumulation outstrips markets.

Ain't no way out except to keep spreading... and then you hit the edge of the world.

Gotta find some Martians to sell superfluous shit to... soon. Either that or figure a way to redivide the world AGAIN.

"quantitative" and "qualitative" in regards the commodity being produced and not the "production" of the commodity as a process. That is what is being spoken of here, isn't it? The quantity and quality of the production, not of the commodity being produced?

We are plodding along building a solid foundation here. I am amazed at how much I missed in previous readings, by the way.

You set up a shop and I set up a shop, making the same commodity. We are both then in a mad frantic race to greater productivity to beat the other guy. We must do this - no choice. There is no going backward or even treading water. Expand or die.

Talking to fruit growers recently, there has been a mad scramble (several hundred growers) to move to high density orchards - more fruit sooner on the same acreage - and to move to new more desirable varieties. Increase your productivity or die, was what they were saying a couple of years ago. Mad scramble, massive borrowing. Now after just a couple of years, there are too many apples this year for the number of boxes to put them in, for the storage space available, not enough trucks, etc. The apples cannot be sold, therefore. Also, prices to the grower collapse. They are victims of their own success. None of this has anything to do with demand. Meanwhile, consumers are not paying less for apples, and workers are not making more, much of the crop will be destroyed, and farmers ruined.

This strikes me as a general statement about the condition of the working class. We are told to go out and be productive in order to meet our needs. Yet we have been productive - we "have produced them and yet..." we "have not got them." The very people producing the commodities are to one degree or another not able to get those commodities. If we made a pair of shoes for ourselves, we would have the shoes. If we made a blanket and then traded it to someone else for a pair of shoes, we would have the shoes and the other fellow would have the blanket. Yet we all are making "shoes" and "blankets," yet we have a very different result - a chronic state of needs not being met - then we would were we making items for ourselves or bartering with others.

our lives have become. My brother in law was a dairy farmer, 3rd generation. He owns about three hundred acres up on the White Earth Reservation in Minnesota. He also leased or rented another 200 or so acres. He had about a hundred head of cattle, maybe sixty milkers. It was killing him. He and his wife just sat down one day and said, "Let's stop this madness." And they did. He sold all of his dairy cows and bought some beef cattle (much easier to manage) and he started driving a big truck for the elevator - the Co-Op. He and his wife are much happier - they have less money - but they actually are beginning to enjoy their lives. He was caught up in the competition and didn't even really realize it until the misery of it all became too much. He told me recently that he and his wife were now beginning to rediscover "farm life" as the enjoyable thing it had once been.

I am amazed at how much I missed in previous readings, by the way.

just means increasing labor time or introducing more labor power and ancillary materials that get entirely consumed in production (as opposed to fixed capital like mmachinery, which gradually transfers value to a product throughout its lifespan) to increase output. Of course there are limits to quantitative increases in productivity imposed by finiteness of population and natural resources, by the number of hours in a day, by the fact that labor power is inseparable from humans, etcetera. These limits in turn require a qualitative increase in productivity, or the introduction of machinery, in order to overcome certain natural obstacles and produce more stuff in equal or less time!

is it possible to look at quantitative and qualitative increases in productivity as the other side of the medal of absolute and relative surplus value?

I don't know, lately I've been getting tired and distracted easily because of my allergy medication.

What the worker gets paid is the price of his labor power ("wages") which, though it is the simple cost of the reproduction of the worker (conditioned by "social norms" and national peculiarities), still goes up very slowly, if at all. The value of what is produced in the time frame that the worker sells in return for wages is completely independent of that calculation (though the difference is, in fact, surplus-value). By virtue of accumulating surplus value, the magnitude of capital grows... and by virtue of competition and the desire for profit, the productiveness of capital also grows. The market is bounded by the social conditions and grows naturally only to the extent that the population under capitalist relations itself grows.

All is fine whilst capital is a small leaf in a large sea of non-capitalist relations. All is still fine as capital begins to strip the countryside of population and convert them into urban workers - the "clearing of the estates". After this proceeds for a while, the limits of national markets are approached and recurring economic crises of increasing intensity are the result. Now capital export and foreign markets become the only outlet that is possible. This is the history of the century which begins in the middle of the 1800s. Competition between individual capitalists is transformed into competition between capitalist nation states.

It is inevitable that it all ends with one country which is dominant... and then, saturation is reached again, but this time without any possible outlet. The second half of your post is now dead on:

"There is not actually over-production - as measured against demand or need - but rather it is relative. The transfer of wealth, expropriated from the worker into the hands of the capitalist, means that inevitably sooner or later people will not be able to buy what the capitalist is selling - regardless of their needs or of demand. It is demand at a certain price that drops off and the supply at a certain price that looks like a glut. The glut, the inevitability of a glut, is certain given the very nature of Capitalism."

It is what entered the literature in the 1930s - The Grapes of Wrath.

Food is burned while people starve.

this material is just as important in its way as the opening of Capital. I'm sure you guys don't, but it would be a mistake to think this material doesn't carry the same urgency and trenchant scrutinizing power

And not only in the context of arcane debates between detached academics either

You say that this is important "not only in the context of arcane debates between detached academics either." I would say it is important least of all in the context of arcane debates between detached academics.

I am amazed at how many things (seemingly unrelated) are becoming more clear, and how many real world applications there are. I am not even aware of intentionally applying anything fo the most part, I am just looking at everything differently now. How did I miss so much (all of it, really) in previous readings? I think that I had unconsciously assumed that Marx was about something called "Marxism" - a sales pitch for a doctrine - and that Marxism was a "belief system" about the "installation of an alternative system." That then made it impossible for me to understand the material (not that it is all that difficult to understand.)

The people defending Capitalism are flat-earthers. Their views may be more popular, so that therefore we are "losers" in a "circle jerk," but I bet we get to the "new world" before they do. They are crippled by their fear of sailing off the edge of the earth.

So many questions that are supposed to plague and bedevil us..and the answers are right there for all to find/see

Through the looking glass in reverse in sight

Now, well, YIKES!

:)

I suppose it wasn't until -very- recently that I thought about what it could mean, the combination of your already formidable way of thinking/writing and the newly acquired critical abilities that come from seeing the "round earth"..

I'll reiterate that I never would have had my pump primed to dive into all of this sort of information had it not been for you.

Go get 'em!

I was resistant to a "forced line-by-line reading" and thought you and kid were nuts for pushing the idea. I was wrong about that, and you were right.

The general law is that all costs of circulation, which arise only from changes in the forms of commodities do not add to their value. They are merely expenses incurred in the realisation of the value or in its conversion from one form into another. The capital spent to meet those costs (including the labour done under its control) belongs among the faux frais of capitalist production. They must be replaced from the surplus-product and constitute, as far as the entire capitalist class is concerned, a deduction from the surplus-value or surplus-product, just as the time a labourer needs for the purchase of his means of subsistence is lost time.

http://www.marxists.org/archive/marx/works/1885-c2/ch06.htm#3

I think this comment is worthwhile, people's lives are so amazingly fucked up and busy, that spending time on political theory just can't happen. Somebody (I can't remember who) argued that after working themselves to the bone, it only makes sense to grab a six pack and watch football on a day off. That's sane, expecting such working people to spend their off time reading Chomsky, Marx or Engels is nuts.

This week somebody I was close to died and my GF's mother is close to dying. Two organizers in a janitors campaign I'm working on got fired for trying to organize. I'm also working on three other events this month, the first one was a UFCW campaign that the company is so disgustingly anti-union that you can barely believe (even in these times) they have a 140 million defense department contract, and just recently obtained a 6 million state economic development grant.

We have some pretty good stuff coming up in the next few weeks, and this site is probably the thing I let go for a while.

Curt is fucking working and all he has to do is say what and I will do. The rest is a fucking bright light on the world as it is. Kid, we are are there...

It is not as though we all need to become economic scholars. But if a few of us get this down, that strengthens all of us. I think that a small handful have a big effect. Supposedly they are all ignoring us, but just watch now how the ideas we are talking about here start to change what people elsewhere are saying and how they are looking at things.

I have had limited contact, for example, with Bageant and Moore. Yet I see a shift in the way they are talking about things now. (Not that I get any credit. The power is in the ideas, and those are not mine.) Those guys are blue collar, not gentrified liberals or academics, so they can put things in words that really resonate with people (and really piss the liberals off.) We are digging up the answers to the questions that are burning in the minds of many people.

"Pssst! The earth is round. Pass it on." If a few are saying that with the conviction that comes from just having sailed around the damned thing, it is absolutely impossible to keep the idea from spreading. It is not required that the entire population get in a boat and sail around the world. From the moment a handful of people start saying it, the flat earthers' days are numbered.

Why do you think people went so bananas when we merely started saying that "the earth might be round. Let's check it out." They desperately need to keep a lid on any speculation about the earth not being flat.

We are building a conceptual framework that can be used by thousands, as opposed to "believed." Were it a belief system, then millions would need to be here studying with us and be converted, and we would be failing. But these are tools, not beliefs, and people will use them without needing to "believe" in anything, because they work, just as people can sail around the world without having to qualify for that in some way.

"Pssst! The earth is round. Pass it on."

since this stuff is dry and presented without much comment.

All of this material will still be here when you get a free moment, man, just didn't want it to get lost in the shuffle

including the shift with Michael and Joe B.

Flabbergasting to me, that so-called leftists watched Moore's film and felt the need to criticize him from the left

What more did they want or need exactly?

You filthy 'vanguardist!'

Watch yourself...

Yes, exactly.

Just sayin'

They are crticizing him from the fake Left - the "Left" that thinks the only problem with Obama is that he is not "progressive" enough on "the issues," and who want Moore to speak in favor of Kucinich or Nader or something, and the "Left" that thinks that "911 was an inside job" and that this is really important, and since Moore doesn't speak about that he must be "an apologist for the official version."

That transporting commodities adds value confused merchant capital at its infancy. They thought that they bought cheap and sold expensive, without putting their finger on the obvious fact that it was always cheap there and expensive here. If a commodity made in China can be transported halfway around the world and still be cheaper, it is a testimony to either the underlying advantage in cost of production or to the efficiency of transport.

Costs of circulation are those associated with turning commodities into money and then back into commodities ("changes in the forms of commodities"). It includes many of the elements of what is called "cost of sales" today, plus accountants, security guards, a big part of "management" and a good deal of the "unproductive labor" employed by corporations. All of these are deductions from surplus-value.

Look forward a couple of paragraphs from your quote:


Quantities of products are not increased by transportation. Nor, with a few exceptions, is the possible alteration of their natural qualities, brought about by transportation, an intentional useful effect; it is rather an unavoidable evil. But the use-value of things is materialised only in their consumption, and their consumption may necessitate a change of location of these things, hence may require an additional process of production, in the transport industry. The productive capital invested in this industry imparts value to the transported products, partly by transferring value from the means of transportation, partly by adding value through the labour performed in transport. This last-named increment of value consists, as it does in all capitalist production, of a replacement of wages and of surplus-value.

Within each process of production, a great role is played by the change of location of the subject of labour and the required instruments of labour and labour-power — such as cotton trucked from the carding to the spinning room or coal hoisted from the shaft to the surface. The transition of the finished product as finished goods from one independent place of production to another located at a distance shows the same phenomenon, only on a larger scale. The transport of products from one productive establishment to another is furthermore followed by the passage of the finished products from the sphere of production to that of consumption. The product is not ready for consumption until it has completed these movements.

As was shown above, the general law of commodity production holds: The productivity of labour is inversely proportional to the value created by it. This is true of the transport industry as well as of any other. The smaller the amount of dead and living labour required for the transportation of commodities over a certain distance, the greater the productive power of labour, and vice versa.[18]

The absolute magnitude of the value which transportation adds to the commodities stands in inverse proportion to the productive power of the transport industry and in direct proportion to the distance traveled, other conditions remaining the same.

...in our reading because:

1) Marx is much easier to read solo once we get past the early sections, and they are by far the most important. Once understood, you can get the rest while reading on the can... if that should be your interest. The opposite is nearly impossible - screaming past the early stuff in the hope of "getting it" later. In truth, most of the 6 volumes (3 of Capital and 3 of ToSV) are a concrete elaboration of the initial theoretical section.

2) I have read too much of the old fart, for too long, not to pick up his disdain for "definitions". Almost everything worked out before he died depends on "derivations", which are defeated by jumping forward.

One of the reasons I like this segment out of ToSV is that the basics don't depend on much more than what we have covered already, "line-by-line". Certainly, the calculus depends on the changing organic composition of Capital and much more than that. Truthfully, many things have evolved since Marx's time, notably state intervention and a primitive global reserve bank. Yet, the basics are identical to 150 years ago with all of the rest appearing as mere variations on a theme.

Still, this is more caution than disagreement.

...let me know if there are any holes in what we have covered that we can help fill.

I get your circumstances. I laugh to myself every time someone talks about "really doing something". I'm wondering about how to do a whole lot less "something".

Still, as you pointed out, I haven't quite seen this sort of thing (Capital) on the web before, it is kinda workin', and it potentially matters.

Keep touch as you can, brother.

..."vanguardist" and "vanguard versus mass party" and "dictatorship of the proletariat" and all that, sometime (but not soon), in the same way we talked about Populists, Nihilists, and "Mensheviks" (that is, in context). All of that jive derives from a time when they were accusing V.I. Lenin, of all people, of being a loosey-goosey Anarcho-Narodnik. ...quite the irony for the ultra democratic anarcho-youngins of today.

'Course, the whole world looks different depending on whether one has the secret police living in ones socks or whether one is discussing "social alternatives" over a cabernet.

It has been objected that upon the abolition of private property, all work will cease, and universal laziness will overtake us.

According to this, bourgeois society ought long ago to have gone to the dogs through sheer idleness; for those of its members who work, acquire nothing, and those who acquire anything do not work. The whole of this objection is but another expression of the tautology: that there can no longer be any wage-labour when there is no longer any capital.


You are horrified at our intending to do away with private property. But in your existing society, private property is already done away with for nine-tenths of the population; its existence for the few is solely due to its non-existence in the hands of those nine-tenths. You reproach us, therefore, with intending to do away with a form of property, the necessary condition for whose existence is the non-existence of any property for the immense majority of society

[div class="excerpt"]
The absolute magnitude of the value which transportation adds to the commodities stands in inverse proportion to the productive power of the transport industry and in direct proportion to the distance traveled, other conditions remaining the same.
[/quote]

in the time of he Silk Road, when the productive power of transport was low, commodities gained enormous value traveling from Asia to Europe. Today, with our tremendously improved transportation(within the strictures of capitalist economics, 'externals' and all that) a boatload of socket sets has virtually no value added.

Inexpensive steel products, transported half way across the world, have long been a source of puzzlement to me. Given the cost of raw material and in manufacturing labor and then add on transport cost it seems crazy. Even if the cost of manufacturing labor is near zero, how can they sell that stuff so cheap? Guess I just got my answer.

Given my, ahem, predilections, I should like to see this laid out in detail. Though I am relatively recently resolved to the necessity of such, based entirely upon my historical readings, my understanding is still superficial. It would be good to dig deeper.

and without all of the background laid out for context, I do think that "dictatorship of the proletariat" is kind of overblown by the fact that "dictatorship" is such a staple in the liberal Litany of Evil.

The thing that has always struck me (and check out the article by Joe B Mike posted in the articles section as it relates) is that we ALREADY live under the most onerous, oppressive, Molochian dictatorship possible -- that of Capital, that of things.

Given that the system rests entirely on unmitigated violence and violation, how else can it be overturned

As an anarcho-friend of mine is fond of saying "Violence works in mysterious ways"

Indeed

Violence is action, only a non-materialist could deny it. The commodification of the earth, of human lives, even thought, of box turtles and obscure rain forest plants necessitates action as a matter of survival. Life strives to survive, and that's that.

...about "tools" versus "belief systems". In fact, all the Socialistas are famous from the beginning for NOT believing anything. That is one of the first counts in the indictment against us.

"Nihilists" - Those who believe in nothing. It would be a point of pride if such a thing were actually possible.

http://upload.wikimedia.org/wikipedia/commons/thumb/b/b7/Dimitri_Pisarev.jpg/180px-Dimitri_Pisarev.jpg

Seems to me that the current cycle, which seems to be coming to a head like a nasty pimple, started at the end of WWII. The one before, I'm not sure. Waterloo surely marked a break, with Britain in a similar position to the US in 1945. Yet there was plenty of boom & bust going on in between. Would the 'Roaring Twenties' be considered a cycle in itself, crashing in 1929? Seems more like a bounce preceding the final catastrophe of WWII. The 1870's-1880's saw a lot of financial turmoil, the rise of the trusts and the modern corporation, perhaps a better choice.

http://socialistindependent.org/board/index.php?topic=324.0

This is really exciting stuff (that may sound odd to some, but I mean it)...

But I feel the same way

I was going to lay it out for Auto, but I (obviously) don't have anything to add ;)

I just left that thread.

Just trying to match the concrete. So Waterloo roughly corresponds with the beginning of the Industrial Revolution. Crimea, 1848, the rise of Prussia and unified Germany are results, the last event marking the beginning of the new cycle. I'm seeing that these things develop unevenly, in the US it was the Civil War, which certainly destroyed a whole class of capital, followed by the Trusts(the 'parvenus'). Expansion of markets by the new round of colonialism worked for a while and then it didn't and any excuse would do.....

So it seems that every 70 years ( an arbitrary, contingent number) they run out of tricks and necessarily behave like cornered rats, with the rest of the world to pay...

Expanding markets are subject to the same logic and contradictions as any other capital

Look at China -- something like 500+ million peasants? And yet it isn't just as simple as adding them to the "domestic market". Whatever gets built gotta pull its own weight when it comes to adding to (expanding) value.

And, as it turns out, its a tough trick to turn without also stoking up class struggle in the process.

occurs - it is the snake eating its tail...I think...Class conflict can arise wherever and whenever exploitation occurs, this is what motivated the "Cultural Revolution"...

the Great Leap Forward and GPCR. Without any first-hand perspective I find it hard to assess, but it seems a little screwy to me from casual reading and study. I get that there are always extenuating circumstances too

But I don't know

I'm looking forward to dissecting the Cultural Revolution in our forthcoming discussion of the Dictatorship of the Proletariat.

He said "not soon" but we'll see lol

Although I think we made a pit stop on crises and are now back on Chapter 1 and Fetishism. Thats a pretty important subject as well.

directions, it is hard to elaborate. And I am enjoying the hell out of it. I would love to discuss the dictatorship of the proletariat and the Cultural Revolution - I am no expert, by any means, but I would love to learn more. But first back to Chapter 1...

I personally think fetishism is the "funnest" part of Chapter 1. It sort of puts a point on everything that precedes it and opens up a window to peer into the depths of a great many subjects that otherwise remian mystified and largely unintelligible even.

I need to reread this over the weekend

Since this thread was written, a very succinct analysis of the current crisis has been published which agrees with this thread in virtually every detail, both theoretical and practical. More... it is from the most unlikely source conceivable.

I'll try to post it and go through it in detail in the next couple of days.

The bastards have no real theory, you know... they borrow ours when they run out of lies.

I have a suspiscion on this, but will be very interested to see what it is

I'm just waiting a day or two for the board drama to die down. The material is important.

to die too

and I do have my Pisarev and scanner... However, I am only now reloading my drivers and OCR (and and and ad nauseum). I have to format my goddamn hard drive in order to get some software to load for a mandatory class - a "class" that I had to drive 15 hours one-way to attend and which did Nothing to explain my installation errors and little more to explain its operation which I was already comfortable with.

So, in between the significantly rising rate of exploitation that has attended my recent Real Work in the field (*this owing to the relative blessing of having too much to do all at one time even as the summer looks bleak indeed), I have had a woeful delay in being able to do much of anything online as I try to rebuild a corrupt work-mail file and reload the scads of apps I run on this laptop when not being fucked over by one in particular or working 12 hour days on construction sites and military bases.

It's almost a living though!

And the "efficiency" of capitalist development, well, it is a sight to behold. It'll be good to get back on a military jawb for while, the fuckin' socialists :)

OET - heh. I really didn't miss anything after all. Same old shit. Show us somethin' older and all new.

"from the most unlikely source conceivable"??

Can't even begin to imagine who that might be (too many options), but...

really looking forward to reading this new analysis!



ETA: btw, what "board wars"?

As far as I know, there was a unilateral "act of war" on the OET side, and the only dubious "victory" they achieved was stabbing people in the back.

Wowzers

The whole thing was pretty blatant and obvious.

But it really does seem to be over for good.

I have no idea WTF is going on here (or elsewhere, for that matter),

but I stand behind what I said in my last post, for however little it's worth.

...and we will return to "business" (the economic crisis).

BTW, there is a real need to look at California in particular through this recession. We should try to get to that sometime in the not too distant future.

Will check in in a couple of days (or sooner).

BTW - OT, but... what did you think of the latest Chomsky? (Or is he also "the Liberal/Progressive Enemy"?)

Chomsky is just Chomsky.

The last thing I saw was in La Jornada early this year, which I think was just a translation of the piece in In These Times. It was about Obama in Latin America. If there is a later "latest", I haven't seen it yet.

The piece about Latin America was insightful as usual... though it coulda been a wee bit liberal ;)

I think things are about to get very interesting here.

This is by Patrick Bond who is a professor at the University of KwaZulu-Natal in South Africa. The account has some weaknesses but it appears prescient as far as the onset of the current "Great Recession" (this was written in 2003 - the emphasis is mine):

http://www.marxmail.org/faq/overproduction.htm


What is a crisis of overproduction?

Prepared by Patrick Bond

Capital accumulation refers to the generation of wealth in the form of "capital." It is capital because it is employed by capitalists not to produce with specific social uses in mind, but instead to produce commodities for the purpose of exchange, for profit, and hence for the self-expansion of capital. Such an emphasis by individual capitalists on continually expanding the "exchange-value" of output, with secondary concern for the social and physical limits of expansion (size of the market, environmental, political and labour problems, etc.), gives rise to enormous contradictions. These are built into the very laws of motion of the system. Perhaps the most serious of capitalist self- contradictions, most thoroughly embedded within the capital accumulation process, is the general tendency towards an increased capital-labour ratio in production--more machines in relation to workers--which is fuelled by the combination of technological change and intercapitalist competition, and made possible by the concentration and centralisation of capital.

Individual capitalists cannot afford to fall behind the industry norm, technologically, without risking their price or quality competitiveness such that their products are not sold. This situation creates a continual drive in capitalist firms towards the introduction of state-of-the-art production processes, especially labour-saving machinery. With intensified automation, the rate of profit tends to fall, and the reasons for this are worth reviewing. Profit correlates to "surplus value" which is only actually generated through the exploitation of labour in production. Why is labour only paid a certain proportion of the value produced, with a surplus going to capital? Since capitalists cannot "cheat in exchange"--buy other inputs, especially machines that make other machines, from each other at a cost less than their value--the increases in value that are the prerequisite for production and exchange of commodities must emanate from workers.

This simply means, in class terms, that capitalists do not and cannot systematically exploit other capitalists but they can systematically exploit workers. Here arises the central contradiction: with automation, the labour input becomes an ever-smaller component of the total inputs into production. And as the labour content diminishes, so too do the opportunities for exploitation, for surplus value extraction and for profits. Given intensifying intercapitalist competition for profits--the basis of the Brenner thesis about the ongoing overaccumulation/falling-profits crisis--this situation exacerbates what becomes a self- perpetuating vicious spiral. Workers (as a whole) are increasingly unable to buy the results of their increased production. In turn this results in a still greater need for individual capitalists to cut costs. A given firm's excess profits are but only temporarily achieved through the productivity gains which automation typically provides, since every capitalist in a particular industry or branch of production is compelled to adopt state-of-the- art technologies just to maintain competitiveness.

This leads to growth in productive capacity far beyond an expansion in what consumer markets can bear. (It is true that there are countervailing tendencies to this process, such as an increase in the turnover time of capital, automation, and work speed- up, as well as expansion of the credit system. But these rarely overwhelm the underlying dynamic for long, and there are limits to the height of the consumer debt pyramid.) The inexorable consequence, a continuously worsening problem under capitalism, is termed the overaccumulation of capital. Overaccumulation refers, simply, to a situation in which excessive investment has occurred and hence goods cannot be brought to market profitably, leaving capital to pile up in sectoral bottlenecks or speculative outlets without being put back into new productive investment. Other symptoms include unused plant and equipment; huge gluts of unsold commodities; an unusually large number of unemployed workers; and the inordinate rise of financial markets.

When an economy reaches a decisive stage of overaccumulation, then it becomes difficult to bring together all these resources in a profitable way to meet social needs. How does the system respond? There are many ways to move an overaccumulation crisis around through time and space. But the only real "solution" to overaccumulation--the only response to the crisis capable of reestablishing the conditions for a new round of accumulation--is widespread devaluation. Devaluation entails the scrapping of the economic deadwood, which takes forms as diverse as depressions, banking crashes, inflation, plant shutdowns, and, as Schumpeter called it, the sometimes "creative destruction" of physical and human capital (though sometimes the uncreative solution of war). The process of devaluation happens continuously, as outmoded machines and superfluous workers are made redundant, as waste (including state expenditure on armaments) becomes an acceptable form of mopping up overaccumulation, and as inflation eats away at buying power. This continual, incremental devaluation does not, however, mean capitalism has learned to equilibrate, thus avoiding more serious, system-threatening crises.

Devaluation of a fully cathartic nature (of which the last Great Depression and World War are spectacular examples) is periodically required to destroy sufficient economic deadwood to permit a new process of accumulation to begin. When overaccumulation becomes widespread, extreme forms of devaluation are invariably resisted (or deflected) by whatever local, regional, national or international alliances exist or are formed in specific areas under pressure. Hence overaccumulation has very important geographical and geopolitical implications in the uneven development of capitalism, as attempts are made to transfer the costs and burden of devaluation to different regions and nations or to push overaccumulated capital into the buildings (especially commercial real estate), infrastructure and other features of the "built environment" as a last-ditch speculative venture. Moreover, the implications of overaccumulation for balance in different sectors of the economy--between branches of production (mining, agriculture, manufacturing, finance, etc.), between consumers and producers, and between capital goods (the means of production) and consumer goods (whether luxuries or necessities)--can become ominous. Indeed, because the rhythm of overaccumulation varies across the economy, severe imbalances between the different sectors and "departments" of production (sometimes termed "disproportionalities" or "disarticulations") emerge and introduce threatening bottlenecks in the production and realisation of value, which further exacerbate the crisis. These processes enhance the control and speculative functions of finance.

The argument, simply, is that as overaccumulation begins to set in, as structural bottlenecks emerge, and as profit rates fall in the productive sectors of an economy, capitalists begin to shift their investable funds out of reinvestment in plant, equipment and labour power, and instead seek refuge in financial assets. To fulfil their new role as not only store of value but as investment outlet for overaccumulated capital, those financial assets must be increasingly capable of generating their own self-expansion, and also be protected (at least temporarily) against devaluation in the form of both financial crashes and inflation. Such emerging needs mean that financiers, who are after all competing against other profit-seeking capitalists for resources, induce a shift in the function of finance away from merely accommodating the circulation of capital through production, and increasingly towards both speculative and control functions. The speculative function attracts further flows of productive capital, and the control function expands to ensure the protection and the reproduction of financial markets. Where inflation may be a threat, the control functions of finance often result in high real interest rates and a reduction in the value of labour- power (and hence lower effective demand). Where bankruptcies threaten to spread as a result of overenthusiastic speculation, the control functions attempt to shift those costs elsewhere. In sum, what we have sketched out above is a story of how crises are generated through the logical internal functioning of modern market economies, whether in national or global settings. A good amount of the world's systematic unevenness and inequality--not to mention its various geopolitical tensions-- follows directly from the ebb and flow of capital, both geographically and from productive to financial circuits.

Hidden within what is an entirely theoretical definition or explanation of "overproduction", as an application of what was postulated by Marx 150 years ago, there is an EXACT description of what just happened... far, far better than the postmortems of television economists and G20 bureaucrats with the advantages of hindsight and real data. If I expand the section I emphasized, it reads like this:

"Hence overaccumulation has very important geographical and geopolitical implications in the uneven development of capitalism, as attempts are made to transfer the costs and burden of devaluation to different regions and nations or to push overaccumulated capital into the buildings (especially commercial real estate), infrastructure and other features of the "built environment" as a last-ditch speculative venture. Moreover, the implications of overaccumulation for balance in different sectors of the economy--between branches of production (mining, agriculture, manufacturing, finance, etc.), between consumers and producers, and between capital goods (the means of production) and consumer goods (whether luxuries or necessities)--can become ominous. Indeed, because the rhythm of overaccumulation varies across the economy, severe imbalances between the different sectors and "departments" of production (sometimes termed "disproportionalities" or "disarticulations") emerge and introduce threatening bottlenecks in the production and realisation of value, which further exacerbate the crisis. These processes enhance the control and speculative functions of finance.

The argument, simply, is that as overaccumulation begins to set in, as structural bottlenecks emerge, and as profit rates fall in the productive sectors of an economy, capitalists begin to shift their investable funds out of reinvestment in plant, equipment and labour power, and instead seek refuge in financial assets. To fulfil their new role as not only store of value but as investment outlet for overaccumulated capital, those financial assets must be increasingly capable of generating their own self-expansion, and also be protected (at least temporarily) against devaluation in the form of both financial crashes and inflation. Such emerging needs mean that financiers, who are after all competing against other profit-seeking capitalists for resources, induce a shift in the function of finance away from merely accommodating the circulation of capital through production, and increasingly towards both speculative and control functions. The speculative function attracts further flows of productive capital, and the control function expands to ensure the protection and the reproduction of financial markets..."

Dead Social Science?

Of course, the larger issue is what does it imply for the future? My "teaser" will underline that this is indeed what happened and why. Then, we can take a stab at what's coming.

...here:

http://www.progressiveindependent.com/dc/dcboard.php?az=show_topic&forum=104&topic_id=106628

This post is in response to a PM on another site, asking me, "Where is it?"