Talking of under consumption

There is many theories for the causes of the current financial crisis we are living through and i have mentioned many myself on this blog. Is there one theory or many ? Its a interesting question and i’m currently lookingat all to see if any fit. One theory which is popular and is pushed by many is the theory of under consumption. This theory is a keynsian analysis of crisis and thus is a bourgeois theory i’m afraid. Unfortunatly even some Marxists stand by this theory and take it into the workers movement. In Karl Marx’s excellent work we can tell that marx many years ago dismissed this theory as a cause of crisis. Marx writes in volume 2 of theories of surplus value in reply to a question of under consumption of the mass’s being the cause of crisis. “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.” (p.527) “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.” (ibid p.5 Overproduction happens because production is for profit In Mick brooks’s excellent piece on understanding the crisis he mentions under consumption as a theory i quote below “ Engels, in his chapter on ‘Production’ in Anti-Duhring, is a stern critic of Duhring’s under-consumptionist interpretation of capitalist crisis. He points out that the restricted consumption of the masses is a permanent feature of capitalism. “But unfortunately the under-consumption of the masses, the restriction of the consumption of the masses to what is necessary for their maintenance and reproduction, is not a new phenomenon. It has existed as long as there have been exploiting and exploited classes. Even in those periods of history when the situation of the masses was particularly favourable, as for example in England in the fifteenth century, they under-consumed. They were very far from having their own annual total product at their disposal to be consumed by them. Therefore, while under-consumptionism has been a constant feature in history for thousands of years, the general shrinkage of the market which breaks out in crises as a result of a surplus of production is a phenomenon only of the last fifty years;” (pp. 395-396). But if under-consumption (in the sense that the workers can’t buy back all the commodities they produce) is a permanent condition of capitalism, then how on earth does capitalism survive, let alone develop? What happens to this excess production (the surplus)? It is quite true that workers can’t buy all the value they produce. Surplus value ends up, of course, in the hands of the capitalist class. This is just another way of saying capitalism is a system where production is for profit. This under-consumption, this inability to realise commodities already produced is really only a potential problem. It would only be a real problem if all the capitalists were to instruct their workers to make workers’ wage goods. In that case the workers would be unable to buy those goods. But why should we assume that this will happen? The workers haven’t got the money to buy the goods, because the capitalists have kept some of it. That is their surplus value. What do the capitalists do with it? There are two possibilities: either they consume the entire surplus unproductively (very rare in practice). In this case the surplus is still spent. It is spent by the capitalists on themselves. The alternative is that the capitalists invest it. If they invest it, that also ‘solves’ the problem of under-consumption for the time being – because the surplus has now been spent on capital goods. Not all capitalists oversee the production of goods they expect to be sold to the workers. Iron and steel capitalists never sell their products to the masses (though, of course their output enters into consumer goods targeted at workers). They are producing capital goods and they know it. Other capitalists specialise in the production of ‘luxury’ goods for consumption by capitalists. Marxists call the products of this sector elements of uncapitalised surplus value. For both these sections of the capitalist class their customers are exclusively other capitalists. The demand for capital goods, for workers’ consumption and for luxury goods is provided by the incomes of the classes generated in the production process, and by the investment decisions of the capitalist class. Of course how much you ‘need’ is determined under capitalism by how much money you’ve got. We expect the relevant sort of goods in roughly the right proportions to meet this purchasing power to be provided by the usual operation of the market. Capitalists in search of profit try to produce commodities aimed at meeting a need. (Actually capitalists produce nothing. Workers produce commodities under the instruction of capitalists. Please accept this as shorthand.) If nobody wants the good, nobody will buy it and the capitalist will make a loss. And purchasing power is derived from the revenues from capitalist production. (Getting the proportions of the material elements of production right is a real problem in an unplanned system..) There is no reason at all, at this level of analysis, why all these products cannot be sold to people (workers and capitalists) who have the money to pay for them. We should no more automatically expect capitalism to produce too many workers’ consumption goods than too many luxury goods or too many capital goods. So there is sufficient purchasing power in the economy to buy all that is produced. And the goods should be in place to satisfy this purchasing power. There seems to be no over-production/under-consumption problem, since markets exist for the surplus. There is always someone out there to buy these products and someone else to sell them. The cause of capitalist crisis must be sought elsewhere. If the crisis were really caused by the ‘restricted consumption of the masses’ we would expect it to be manifested by an over-production of consumer goods relative to capital goods. In fact this is by no means the usual case in actual capitalist crises. Most crises have actually begun in the capital goods sector. If the crisis were caused by under-consumption we would expect the workers to suddenly cease providing an adequate market for the capitalists, so triggering the crisis. Actually workers’ consumption usually falls as they are laid off as a result of the crisis, further shrinking markets. Their restricted consumption is thus a symptom of the crisis, not its cause. If capitalists generally accumulate a great part of their surplus, then we can expect the capital goods sector to grow relative to consumer goods in the economy. But the effect of this accumulation of capital is to make the workers more productive and therefore make the problem of over-production potentially more severe in the future” Marx indeed was quite fierce in his ideas that under consumption was not the cause of crisis but a result if you like. In Capital Volume II, Marx pointed out that towards the end of the boom, as it was on the point of toppling over to bust when there was relatively full employment, was the time when workers were likely to make gains in real wages and increase their share of national income. “It is a pure tautology to say that crises are provoked by the lack of effective demand or effective consumption…If an attempt is made to give this tautology the semblance of greater profundity that the working class receives too small a portion of its own product and that the evil would be remedied if it received a bigger share if its wages rose, we need only note that crises are always prepared by a period in which wages generally increase and the working class does receive a greater share in the part of the annual product destined for consumption.” (p. 48 Marx was clear that the most important law of political economy is the Law of the tendancy of the rate of profit to fall. This was backed up twice in two places it was that important marx felt.  Marx made this statement twice, in the Grundrisse  written in 1857-8: and in almost exactly the same words in the 1861-3 economic manuscripts (Collected Works Volume 33, p.104): “This law, and it is the most important law of political economy, is that the rate of profit has a tendency to fall with the progress of capitalist production. Some say this is a tendancy and only a tendancy but Marx took a different view to how we see tendancies today For those that the law is simply a tendency, suggesting that it doesn’t matter. “It is a tendency and not a law, as Marx emphasised,” in the section Tendency always applies that for Marx all economic laws take the form of a tendencyFor Marx a tendency has the meaning of a force at work, not a statistical trend. For instance: “Such a general rate of surplus-value — viewed as a tendency, like all other economic laws — has been assumed by us for the sake of theoretical simplification.” (Capital Volume III p.275) with thanks and references Mick Brooks http://www.karlmarx.net/marx-crisis-theory/marxisttheoryofcrisispartone Karl Marx capital volume 2 and 3 Karl Marx theories of surplus value volume 2

The acceleration of capital the speeding up of society

I have started to read Karl Marx’s mammoth book of capital volume 2 after completing volume one not so long ago. It’s a text I will return to I am sure over time as holds so much unwrapped knowledge that can hold so much potential in the class struggle and understanding capitalism .

But volume two so far is a very different text. Focusing on a lot more theory behind the movement of capital and the process’s involved not much politics at all compared to volume one. This book is I have been told a boring book and is a hard read I may not complete it as many don’t but at first glance I can tell there is something going on with the movement of capital.

In today’s capitalist society of a financially focused economy certainly in the west excluding Germany dominates.

But throughout this century and the one before everything about capitalism has been focused round speeding the process of things up. Increasing turnover and production.
The idea is that the more and quicker you can produce commodities the quicker you can make a profit and gain an advantage over your competitors.

This has been the way of capitalist production for some time now if we look at food production for example and the example of meat Pigs now are breed now for giving birth to litters 3 times a year now instead of just the one that is normal for a pig.

Also if you read back to Charles Dickens days in his books the meat was mutton but now we all eat Lamb as it was found that you can breed more and eat them younger specifically breeding for consumption.

The whole idea of speeding up production to increase turnover of profit is something that has been as natural to capitalist production as day is to night. Ever since its inception capitalist production has always looked to find quicker and more efficient ways of producing products. Even though this is cancelled out by the huge waste in competition it creates.



The consumption of the working class doesn’t really play a big part in Marx’s first volume of capital but does play more of a part in volume 2. The consumption of the workers is key to capitalism whether workers can buy back the fruits of their labour is often a question posed. One of the contradictions that can play a part in the crisis’s of capitalism is the fact that production is speeded up so much that workers do not earn enough to buy back the fruits of their labour leading to a over production and a big gap between what the workers can afford with their wages compared to the surplus value that is created in their labour time. The accumulation of capital touched on towards the end of the first volume of capital by Marx is revisited in volume 2 the concentration of wealth by one part of society i.e. the rich and the bourgeoisie in other words means that at the other end of the scale there is a mass pool of poverty and deprivation. Of course the ideas of the increased reserve army of workers plays a bigger part and holds workers in work wages down to a minimum.
This accumulation of capital has several affects one it narrows competition in the market and can in a way almost bring the market to a halt at points. As barriers to continue production a mass of wealth in fewer and fewer hands as is the case with the development of capitalism does lead to deeper and deeper crisis’s which capitalism fails to deal with.

The unplanned nature of capitalism and the desperate drive for profit and more profit can lead to huge over production and under consumption by the masses of people but this is again more contradictions in the system and its inner workings.

I feel that the speeding up of capitalist production can lead to deeper and far quicker crisis’s and move the system on closer to the next meltdown. I will continue to read more on volume 2 and blog on any other new things I come across that can help me understand how Marx interpreted the capitalist system.

Contradictions in capitalism part 4 : workers wages

In this 4th piece of my mini series on the contradictions in the current economic system we live under capitalism i have looked at various things that leads capitalism to crisis's and the reasonings behind them.

In this piece we look at workers wages and how they are paid and how the boss's decide how much a worker earns.
“Every upward movement in wages can have no other effect than a rise in the price of corn, wine, etc., that is, the effect of a dearth. For what are wages? They are the cost price of corn, etc.; they are the integrant price of everything. We may go even further: wages are the proportion of the elements composing wealth and consumed reproductively every day by the mass of the workers. Now, to double wages ... is to attribute to each one of the producers a greater share than his product, which is contradictory, and if the rise extends only to a small number of industries, it brings a general disturbance in exchange; in a word, a dearth....
( Karl Marx - povety of phillosophy chapter 2)

The rise and fall of profits and wages expresses merely the proportion in which capitalists and workers share in the product of a day's work, without influencing in most instances the price of the product. But that “strikes followed by an increase in wages culminate in a general rise in prices, in a dearth even” – those are notions which can blossom only in the brain of a poet who has not been understood.

In England, strikes have regularly given rise to the invention and application of new machines. Machines were, it may be said, the weapon employed by the capitalist to quell the revolt of specialized labour. The self-acting mule, the greatest invention of modern industry, put out of action the spinners who were in revolt. If combinations and strikes had no other effect than that of making the efforts of mechanical genius react against them, they would still exercise an immense influence on the development of industry.


The price of Labour Power.

Let us take any worker; for example, a weaver. The capitalist supplies him with the loom and yarn. The weaver applies himself to work, and the yarn is turned into cloth. The capitalist takes possession of the cloth and sells it for 20 shillings, for example. Now are the wages of the weaver a share of the cloth, of the 20 shillings, of the product of the work? By no means. Long before the cloth is sold, perhaps long before it is fully woven, the weaver has received his wages. The capitalist, then, does not pay his wages out of the money which he will obtain from the cloth, but out of money already on hand.....Wages, therefore, are not a share of the worker in the commodities produced by himself. Wages are that part of already existing commodities with which the capitalist buys a certain amount of productive labor-power.....

Now, the same general laws which regulate the price of commodities in general, naturally regulate wages , or the price of labor-power. Wages will now rise, now fall, according to the relation of supply and demand, according as competition shapes itself between the buyers of labor-power, the capitalists, and the sellers of labor-power, the workers. The fluctuations of wages correspond to the fluctuation in the price of commodities in general. But within the limits of these fluctuations the price of labor-power will be determined by the cost of production, by the labor-time necessary for production of this commodity: labor-power.

What, then, is the cost of production of labor-power?

It is the cost required for the maintenance of the laborer as a laborer, and for his education and training as a laborer.

Karl Marx, Wage Labour and Capital



Wage labour is the mode of production in which the labourer sells their capacity to work as a commodity.

The pre-condition for wage labour is a class of people who have no other way of living, and a class of people who own the means of production as their Private Property. The capitalist who buys the labour power, and pays for it at its value, own the labour process and the product of labour, and can sell the product in order to realise a profit. The worker, on the other hand is alienated from her own labour.

Their commodity, labor-power, the workers exchange for the commodity of the capitalist, for money, and, moreover, this exchange takes place at a certain ratio. So much money for so long a use of labor-power. For 12 hours' weaving, two shillings. And these two shillings, do they not represent all the other commodities which I can buy for two shillings? Therefore, actually, the worker has exchanged his commodity, labor-power, for commodities of all kinds, and, moreover, at a certain ratio. By giving him two shillings, the capitalist has given him so much meat, so much clothing, so much wood, light, etc., in exchange for his day's work. The two shillings therefore express the relation in which labor-power is exchanged for other commodities, the exchange-value of labor-power....

But the putting of labor-power into action -- i.e., the work -- is the active expression of the laborer's own life. And this life activity he sells to another person in order to secure the necessary means of life. His life-activity, therefore, is but a means of securing his own existence. He works that he may keep alive. He does not count the labor itself as a part of his life; it is rather a sacrifice of his life. It is a commodity that he has auctioned off to another. The product of his activity, therefore, is not the aim of his activity. What he produces for himself is not the silk that he weaves, not the gold that he draws up the mining shaft, not the palace that he builds. What he produces for himself is wages ; and the silk, the gold, and the palace are resolved for him into a certain quantity of necessaries of life, perhaps into a cotton jacket, into copper coins, and into a basement dwelling. And the laborer who for 12 hours long, weaves, spins, bores, turns, builds, shovels, breaks stone, carries hods, and so on -- is this 12 hours' weaving, spinning, boring, turning, building, shovelling, stone-breaking, regarded by him as a manifestation of life, as life? Quite the contrary. Life for him begins where this activity ceases, at the table, at the tavern, in bed. The 12 hours' work, on the other hand, has no meaning for him as weaving, spinning, boring, and so on, but only as earnings, which enable him to sit down at a table, to take his seat in the tavern, and to lie down in a bed. If the silk-worm's object in spinning were to prolong its existence as caterpillar, it would be a perfect example of a wage-worker.

The free laborer , on the other hand, sells his very self, and that by fractions. He auctions off eight, 10, 12, 15 hours of his life, one day like the next, to the highest bidder, to the owner of raw materials, tools, and the means of life -- i.e., to the capitalist. The laborer belongs neither to an owner nor to the soil, but eight, 10, 12, 15 hours of his daily life belong to whomsoever buys them. The worker leaves the capitalist, to whom he has sold himself, as often as he chooses, and the capitalist discharges him as often as he sees fit, as soon as he no longer gets any use, or not the required use, out of him. But the worker, whose only source of income is the sale of his labor-power, cannot leave the whole class of buyers, i.e., the capitalist class , unless he gives up his own existence. He does not belong to this or that capitalist, but to the capitalist class ; and it is for him to find his man -- i.e., to find a buyer in this capitalist class.

Karl Marx
Wage Labour and Capital



We conclude this part of this mini series bhy looking at the fact that a capitalist will never pay the worker the true value of his or her labour as then they would be owning the means of production owning their own labour of which they currently do not unfortunatly.
Wages reflect a certain level of work that the capitalist pays for and gets back in the final product which he then sells to make a profit. The worker only recives part of this as Marx tells us. So the contradiction is clear for all to see the capitalist is exploiting the workers to increase his or her profits. That is essentially a capitalist in a nutshell only interested in profits . In times of economic downturn in a capitalist system wages are one of the first things to get cutback this wage is waht the worker lives on and is made to suffer due to the capitalists lack of need for production as he has produced too much that he cannot sell. As i have explained in previous parts in this series there is another contradiction in capitalism that encourages capitalits to over produce in their blind search for profits and more profits. The one who always suffers as a result of this is the poor worker who is left out of pocket and soften out of a job.

In the last part of this mini series i will conclude all the contradictions and look to offer an alternative which of course is socialism. The social centralisation of the means of production in the hands of the working class and a end to wage slavery.

contradictions of capitalism part 1 : over production

In this short but could turn out to be something more i will look at the inherent contradictions that exist in the capitalist system of production and how i feel a chance of system namely socialism can help to get around these issues well and truely for good.

As we sit here worrying for our jobs, pay and benifits i thought i'd look at the system which has caused all this and is still causing this and how it knows no way out.

The first contradiction i will look at is the fact that as capitalism has progressed over there years and has been progressive up to a point. When Margret Thatcher declared in the late 70's early 80's that the harder you work you can move up the scale and improve your life. This was true up to a point as some did make it and were able to buy their own home and such like. But for the majority this was not the case their living standards and pay stayed the same. Much like in America many are promised if they work hard they can achieve anything via the American Dream but for many now it is turning into a American nightmare as debts pile up and cheap credit has been ended.

The fact with capitalism as Karl Marx described over 100 years ago now is still relevant today that capitalism and its sheer blind drive for profit can lead to a over production in its products. Leading to a surplus. Marx identified this surplus as a labour surplus and a surplus of capital wrapped up in too much made of one product or another.

For example when the original banking crisis hit in 2008 Honda actually stopped production of its cars for 6 months as it had made too much cars. Sounds remarkable too many cars but this wasnt for the fact there was no need. There is a great need around the world. But capitalism only produces where it feels it can make a profit. The fact that there is a need for something is neither here nor there. Take for example many drugs are needed to help cure diseases around the world in places like Africa but yet Africa which has been raped for its raw materials over the years for capitalist profit over the years has resulted in desimation in Africa.

Going back to my last point even though there is a need there in places like Africa for cars, food, drugs and things that will improve their lives the fact that in Africa few have much capital to invest in these the capitalists in the west ignore Africa and let it starve effectively as there is no profit to be made there.

Where the system which we as socialists advocate would be far more efficient and useful for the majority not just the few would be that there would be no unessesary waste of materials as everything produced and propriated would be for a need and peoples needs as a whole not just to make profit. Indeed there would be a end to a profit driven society where things were only made if a profit could be made.

In socialism things would be run, managed and controlled democratically by workers. Not greedy capiatlists only interested in profit. Only the workers know how to distribute the resources effectively and to help the many not just the few.

Of course this will take some time to bed into peoples minds as capitalist modes of productions and the means of production has been with the capiatlists for so long now and how labourers have had to sell their labour just to live is so ingrained in many peoples minds it will be hard to overcome these ideas but a mass political understanding of what society needs and how their actions can benifit society by working for the collective not a capitalist only interested in profit.

This is just a basic outline of just one of capitalisms many contradictions and i will try to uncover many more where i feel capitalism has failed the mass's and highlighting its weakness's as a system.

over Producttion and waste in a capitalist society

In a capitalist society in which we live under in this country and the western world production and profit is everything. I have been doing some reading on production in a capitalist society and how in its attempts to strive for profit it can over produce and end up with a lot of waste.

As we know the more there is of a product or a service the price of that commodity will come down so i find it personally very sad in countries like America for example when growing wheat the capitalists will often over produce and end up with a surplus of a product. But a clever trick they use which can bring down the price of wheat for example if they have produced too much and bringing the price down on the market they are not happy with this so they will burn the wheat off or dump it in the sea to bring the stock value of the wheat down which as a result will increase the price of wheat as there is naturally less of it now. I say naturally this is not natural at all and is very wrong. To maintain their high profits the capitalists falsley inflate the prices of a product.

This can also be exampled in the sandwich making market where too many sandwichs are made to have a surplus in the hope to sell as many as possible, this is greed in my eyes i'm not sure about you. But instead of allowing taht surplus to go to the poor or the homeless or in the example of the wheat send it to poorer nations who are starving they will instead destroy it. Very selfish indeed but these are some of the lengths this class of society will go to create a profit for itself and a supposed better life for its class. Not for all though i might point out.

In a socialist society the surplus of a product or service produced as there will still be some, Possibly not as much as the capitalists produce but certainly some and that surplus be it skilled or unskilled production will be reinvested into the state and for the benifit of the people. That there in lies the main difference between capitailism and socialism, what happens with the surplus money or produce. The socialists will spread the surplus back amoungst the rest of society equally and not hoard it by the few at the very top of society holding all the power.

So i personally feel that the capitailist ways of doing things and spreading wealth is just not fair and we need to keep up the struggle to address these unfairness's in society for the benifit of all.

As for production i think thata ny surplus produce or service made should be spread to those who need it. It will make no differnce to the price of goods to the western world as most of the 3rd world are not allowed to trade with us anyway. Which is another topic for me to look at another time. Free trade and how parts of the world are excluded from ever making anything of their country and developing as are being held back by the powerhouses of the west so they can exploit them.

Just a few thoughts from the discussion i was at last night where we were discussing marxist economics and how marx saw the capitalist terms of production.