Are crises caused by overproduction?
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I missed out on the discussion at conference so would like to flesh this out here.
As far as I’ve worked it out the answer to the question is NO.
To say that crises are caused by overproduction is to just give a tautological description of what a crisis is – it’s like saying that road accidents are caused by cars colliding.
Overproduction is the form that crisis take in capitalism (underproduction was the form of crisis in pre-capitalist societies) but this is altogether different thing than to say that are its cause. No overproduction, no crisis – no road accident, no cars colliding. In saying one causes the other is not to say very much, in fact its completely meaningless.
The ultimate cause of crisis surely has to be in the anarchy of production itself, producers do not know that there is a buyer for their commodities until after they have been put on the market.
But this does not explain why a crisis should occur at one time and not another. I think this can only be understood by looking at profit rates, credit bubbles etc.
Anyway perhaps someone who was in Clapham can enlighten me as to what was discussed, and comment on what I have just said.
Hmm. A bit elitist to only include those who attended the talk at Clapham. Places the likes of myself out of the conversation, doesn’t it!!!!!!!!
I agree its the anarchy of production which is the cause of a crisis and not overproduction which is an effect. Paradoxically without the anarchy of the market capitalism wont exist. Basically, a crisis is the result of capitalism running out of steam with the potential for profit no longer visible. Capitalism can only pick up steam once its gone through the process of destroying the existing value and creating a more level playing field by ridding itself of some of the distortions in the market.But like Marx explains the solution of one problem only creates further problems.
DJP wrote:Overproduction is the form that crisis take in capitalism (underproduction was the form of crisis in pre-capitalist societies) but this is altogether different thing than to say that are its cause. No overproduction, no crisis – no road accident, no cars colliding. In saying one causes the other is not to say very much, in fact its completely meaningless.The ultimate cause of crisis surely has to be in the anarchy of production itself, producers do not know that there is a buyer for their commodities until after they have been put on the market.But this does not explain why a crisis should occur at one time and not another. I think this can only be understood by looking at profit rates, credit bubbles etc.I don’t think “anarchy of production” per se is the ultimate cause of crises. After all, unless you are an advocate of society-wide central planning in which the totality of inputs and outputs are consciously coordinated in an apriori sense within a single vast plan – an absurd idea – then socialism too will be based too an an extent on an “anarchic”, self regulating or spontaneously ordered system of production involving the mutual adjustment of a multitude of plans to each other. Actually , there is no other way in which a large scale complex system of production can be run.. While anarchy of prediction does indeed give rise to the possibility of disproportionate growth, in socialism this does not present a problem. If a particular production unit or industrial sector has overproduced in relation to the demand for its products – something which it will be able to very easily able to see from the build up of stock – this can be easily remedied by simply curtailing or slowing down production. . This is an example of what I mean by mutual adjustment. Its a feedback system In capitalism, however, this self same disproportionate growth can lead to huge problems and ultimately economic crises and the key to understanding why this is so is contained in Marx’s aphoristic comment concerning “the very connection between the mutual claims and obligations, between purchases and sales” within a capitalist system (Theories of Surplus Value, Chapter 11, 4c). Its is this connection that creates the possibility of knock on effects that hugely amplify the consequences of disproportionate growth that periodically plunge capitalism into crisis. Workers laid off in one sector of the economy have less to spend on consumer goods produced in other sectors. Likewise the demand for producer goods declines which effects firms producing these goods who in turn lay off their workers and so on and so forth.Its is in this way that disproportionate growth can spiral out of control under capitalism . In socialism since this” very connection” no longer exists disproportionate growth no longer presents a serious problem
robbo203 wrote:I don’t think “anarchy of production” per se is the ultimate cause of crises. After all, unless you are an advocate of society-wide central planning in which the totality of inputs and outputs are consciously coordinated in an apriori sense within a single vast plan – an absurd idea – then socialism too will be based too an an extent on an “anarchic”, self regulating or spontaneously ordered system of production involving the mutual adjustment of a multitude of plans to each other. Actually , there is no other way in which a large scale complex system of production can be run..Nice point Robin. I guess you should the proviso ‘profit motive’ should be added to avoid this possible confusion.
Comrade Browne, introducing the item on behalf of Lancaster Branch, argued that the present crisis, as previous ones, had been caused by overproduction and that the only way out would be the destruction of the overproduced surplus through a war as had happened with the crisis of the 1930s. He suggested that this war would be between China and the rest of the world over the resources of the Middle East.Other delegates expressed scepticism about this, arguing that a more likely way out of the crisis would be when wages had fallen enough and assets had devalued (not necessarily physically destroyed) enough to restore the rate of profit, however long this might take.
DJP I don’t think over production should be likened to a car accident. Over production is not necessarily bad but a car accident is definitely bad. In capitalism overproduction AND car accidents are bad. In socialism car accidents will still be bad but over production will not cause crisis. Overproduction cause crisis in capitalism but not in socialism. Car accidents cause injury in both capitalism and socialism. I haven’t had my coffee yet, so this probably only makes sense to me!
TheOldGreyWhistle wrote:DJP I don’t think over production should be likened to a car accident.You’re misunderstanding me. I wasn’t saying that crises are like car crashes but using it as an illustration of what a tautology is.
Capitalism is a crisis
Of course we talking about “overproduction” of commodities as articles produced for sale in relation to the market for them, not of products in relation to people’s needs. As Marx pointed out (in Volume 2 of Theories of Surplus Value:
Quote: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.TheOldGreyWhistle wrote:Capitalism is a crisisLike Adam and the quote from Marx reminds us above we are observing a “crisis” which impacts on the production of commodities. The surface appearances of this crisis seem to affect the whole of society but the truth is for the capitalist class there is no crisis its just business as usual.
Brian wrote:I agree its the anarchy of production which is the cause of a crisis and not overproduction which is an effect. Paradoxically without the anarchy of the market capitalism wont exist. Basically, a crisis is the result of capitalism running out of steam with the potential for profit no longer visible. Capitalism can only pick up steam once its gone through the process of destroying the existing value and creating a more level playing field by ridding itself of some of the distortions in the market.But like Marx explains the solution of one problem only creates further problems.The ‘anarchy of production’ is capitalist production – So capitalism causes crisis? Not very helpful to an economist trying to heal capitalism but why should that concern us?
TheOldGreyWhistle wrote:Brian wrote:I agree its the anarchy of production which is the cause of a crisis and not overproduction which is an effect. Paradoxically without the anarchy of the market capitalism wont exist. Basically, a crisis is the result of capitalism running out of steam with the potential for profit no longer visible. Capitalism can only pick up steam once its gone through the process of destroying the existing value and creating a more level playing field by ridding itself of some of the distortions in the market.But like Marx explains the solution of one problem only creates further problems.The ‘anarchy of production’ is capitalist production – So capitalism causes crisis? Not very helpful to an economist trying to heal capitalism but why should that concern us?
Because it provides us with the ammunition to say ‘Capitalism is beyond healing and its in our interests to speed up the process’. And, ‘In anticipation of that occurring lets start digging the grave by preparing and planning for the future society’.
On Saturday a young Maoist , from the Communist Party of Great Britain (Marxist Leninist), came into Head Office. We paid for copies of their paper Proletarian and Lalkar (published by Harpal Brar of the Stalin Society) with 5 volumes of the writings of Kim Il Sung which someone had donated to us. The point of this is that in the January/February issue of Lalkar there’s an article which puts the case for the present crisis being a crisis of underconsumption (even though it calls it a crisis of “overproduction”). The article can be found here. It’s paragraphs 2 and 3 in the subsection “The crisis in Europe” that offer their explanation of the crisis:
Quote:This crisis has been building up over at least the last 30 years. It is at heart a classic crisis of overproduction, this being the design fault built into the capitalist system. As the masses of workers – who at the same time make up the bulk of consumers – are, in the interests of profit, paid as little as possible and reduced in number as much as possible, they are increasingly unable to buy all the increasing mass of commodities that the capitalist enterprises bring to market. This in turn bankrupts the least “efficient” of the capitalist enterprises, causing further job losses and downward pressure on wages caused by an excess of the supply of labour power over the demand for the same. Bankruptcies start to escalate, while economic activity stagnates. However, this process can be, and is, retarded by the simple expedient of the capitalists, who would otherwise find it difficult in the circumstances to invest profitably, lending money to workers to enable them to continue as consumers despite their relative poverty. (…) But then comes the day of reckoning – literally speaking – the day the borrowing must be repaid. So much has been borrowed, however, that repayment is no longer possible.This is quite a common explanation of the current crisis, put forward even by people who consider themselves Marxists, but it’s not true as it ignores the fact that what the workers can’t buy (out of their wages) the capitalists can (out of their profits). In fact, from one point of view, a crisis is caused by capitalists choosing not to buy (not invest profits because they judge they won’t make any profits or not enough). Crises are not caused by workers not being able to buy back all they’ve produced. If this was the case, what would need explaining would not be crises but why there could ever be a boom.And Marx himself noticed:
Quote:It is sheer tautology to say that crises are caused by the scarcity of effective consumption, or of effective consumers. The capitalist system does not know any other modes of consumption than effective ones, except that of sub forma pauperis or of the swindler. That commodities are unsaleable means only that no effective purchasers have been found for them, i.e., consumers (since commodities are bought in the final analysis for productive or individual consumption). But if one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and “simple” (!) common sense, such a period should rather remove the crisis. It appears, then, that capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis.
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