Why the underconsumptionists appear to be winning the argument

This is the perception anyway. The underconsumptionist argument detailed by myself and Bruce and Steve Dobbs in various blogs in the last few months has detailed how they as revolutionaries try to explain the crisis. It is clear that this is a popular and highly thought of position certainly within the trade unions anyway. This is a worry and not just for Marxists. If the trade union movement or the labour movement believe in reforming capitalism and that it is simply a lack of demand that is hampering the capitalist mode of production from investing then we are indeed in a very very bad place indeed. I do believe the under consumption position is so wide spread is because it is easy. It is easy to understand and then consider yourself a Marxist if you get it which frankly isn’t hard. You don’t need to read Marx or Lenin or any Marxist economist if you believe that there is no such thing as a falling rate of profit or if you do and just consider it maybe as part of a multi causal cause of a crisis under capitalism then you nod to yourself and carry on This was in fact my position for a long time and due to me not critically thinking and not questioning the position and the economic analysis of my own party I just took this explanation as read. I have now met a fantastic group of Marxists and have now started to root out the causes of capitalist crisis and Marx himself provided us with a brilliant and well thought out explanation and it is an amazement that more Marxists do not and refuse to take this up. I do wonder why. Maybe the implications of what Marx says is too much for some and the status quo is something however much some may detest it maybe just too great to get rid of all together ? But as I say holding a under consumptions view on the cause of the crisis and all crisis's is a quite simple and yet it is not a view that is helpful to the labour movement. Under consumptionism which in affect is a Keynesian idea and as a result is a bourgeois idea and even Keynes was not on the side of the workers so why some bring this into the labour movement I have no idea. Maybe they fear the socialist revolution more than the capitalists themselves? As I say this is an easy position to get to grips with all be it not a Marxist position at all as I shall explain. “For Marxists, capitalism goes into economic slump because profitability drops so much that the mass of profit starts to fall. This leads to capitalists stopping investment in real production. If credit is provided, investors use their money to invest in other assets that are not productive like property or speculating in shares. Thus this capital becomes fictitious. It will not stop the eventual slump but merely delay it. Once enough capital value (of money, labour and plant) is destroyed and profitability is restored, those capitalists that are left will start to invest again and the ‘liquidity trap’ will end. Just as huge dollops of credit will not stop a slump under capitalism; neither will huge dollops of credit revive capitalism, if profitability is not right.... Slumps cannot be avoided under capitalism, because they are necessary to restore profitability when it gets too low.” The laws of motion that Marx identified in the capitalist mode of production, including the Law of the Tendency of the Rate of Profit to Fall (LTRPF), are responsible for booms and slumps and crises. Quite often you will get arguments like this below on the left and must be taken to task as Steve Dobbs a fine comrade and a comrade I have huge respect for has done in his blogs repeatably . “The reality is the capitalist system has reached its limits. In the past, it was able to develop the productive forces at a colossal pace. The recent period of globalization and intensification of world trade reflects the latest efforts of the system to overcome its contradictions. Credit was used to extend the market beyond the limits of capitalism but this has now reached its limits..... While corporations are flush with cash, they are not prepared to invest given the lack of markets but without investment there can be no recovery. This, in turn, adds to a collapse in demand. It is a vicious circle.” The capitalist system has reached an impasse. Sound familiar? It gets better: “Marx analysed capitalism long ago. He explained the contradictions of a system based upon the drive for profit. The capitalists employ workers in order to squeeze surplus value from their labour. This surplus value is then reinvested by the capitalists to make more money which serves to develop the productive forces. However, the barrier to capitalism is capital itself. The outpouring of commodities seeking new markets reaches a crescendo at the height of the boom. However, there comes a point where the limits of the market come into collision with the unlimited production of commodities. This leads to an inevitable crisis of over-production, as witnessed in 2008-9. Everything comes to a complete standstill. The capitalist system is paralyzed, not because people do not want things, but because of a shortage of effective demand, i.e. money to buy the products.” So now the problem is the limits of the market – there is not enough demand for all these commodities produced, so there is overproduction of commodities. This is nonsense. Workers can never afford to buy back the goods they produce, so how can this be a cause of crisis? Overproduction is never in relation to consumer demand, as I explained previously. “A fall in the rate of profit and accelerated accumulation are different expressions of the same process only in so far as both reflect the development of productiveness.... Those economists, therefore, who, like Ricardo, regard the capitalist mode of production as absolute, feel at this point that it creates a barrier itself, and for this reason attribute the barrier to Nature (in the theory of rent), not to production. But the main thing about their horror of the falling rate of profit is the feeling that capitalist production meets in the development of its productive forces a barrier which has nothing to do with the production of wealth as such; and this peculiar barrier testifies to the limitations and to the merely historical, transitory character of the capitalist mode of production; testifies that for the production of wealth, it is not an absolute mode, moreover, that at a certain stage it rather conflicts with its further development.” (Marx, Capital vol 3, Chapter 15, http://www.marxists.org/archive/marx/works/1894-c3/ch15.htm) As Marx states, the capitalist mode of production becomes the barrier to itself because of the falling rate of profit, which means that capital can no longer accumulate at the same pace. This is rooted in production, not the market. In fact, Marx explicitly cites the falling rate of profit as the underlying cause of over-production and crises: “On the other hand, the rate of self-expansion of the total capital, or the rate of profit, being the goad of capitalist production (just as self-expansion of capital is its only purpose), its fall checks the formation of new independent capitals and thus appears as a threat to the development of the capitalist production process. It [the falling rate of profit] breeds over-production, speculation, crises, and surplus-capital alongside surplus-population.” (Marx, Capital vol 3, Chapter 15, http://www.marxists.org/archive/marx/works/1894-c3/ch15.htm) Clearly, having large amounts of debt in itself does not cause crisis. Remember, the highest percentage of debt to GDP, 250%, the British government had was after WW2, but it was able to pay off most of the debt over the proceeding decades on the basis of the high rate of profit. http://www.google.com/url?q=http%3A%2F%2Fsocialismiscrucial.files.wordpress.com%2F2013%2F08%2Fuk-debt.jpg&sa=D&sntz=1&usg=AFQjCNFxiv0oIittK6-hP5A1Ey7cg2wT6w With thanks and links and references to comrade Steve dobbs who blogs at http://wp.me/p2NvOP-36

Prospects for the UK economy

Prospects for the UK economy As we hear today Britain has seen some modest growth figures. Is this cause for celebration or a false dawn? — Britain's economy grew faster than thought in the second quarter, official data showed on Friday, extending a broadly based recovery. Gross domestic product (GDP) -- the total value of goods and services produced in the economy -- grew by 0.7 percent in the second quarter, the Office for National Statistics said in a statement. That marked an upgrade from the initial estimate of 0.6-percent expansion. Growth occurred across all sectors of the economy, with small upward revisions across manufacturing, construction and parts of services. Second-quarter GDP growth has more than doubled from the 0.3-percent expansion that was witnessed in the first three months of the year. The economy expanded by 1.5 percent in the second quarter, or three months to the end of June, compared with the equivalent period in 2012, the ONS added. That was also up from the previous estimate of 1.4 percent. Sterling and the London stock market shrugged off the news. Market expectations had been for no change to both figures, according to analysts polled by Dow Jones Newswires. The ONS added that construction activity expanded by 1.4 percent in the second quarter, up from the initial estimate of 0.9 percent, as the housing market was partly lifted by state schemes that are aimed at stimulating lending to homebuyers. Factory output grew 0.7 percent in the quarter, up from the prior figure of 0.4 percent, while consumer spending rose 0.4 percent. There were also upward revisions for output from distribution, hotels and catering firms, as well as business services and finance firms, and the agriculture sector. Britain's shrinking net trade deficit, which dropped to £3.2 billion ($5.0 billion, 3.7 billion euros) in the second quarter from a £4.3-billion deficit in the first quarter, also boosted growth as exports hit a record level. Friday's data comes one week after news that British retail sales -- a vital indicator of consumer confidence -- jumped 1.1 percent in July from June as a heat wave fuelled spending on food, drinks and summer clothing. "The slight upward revision to Q2 GDP continues the run of good news on the UK economy and the spending breakdown looks reasonably encouraging too," said Vicky Redwood, chief UK economist at consultancy Capital Economics. "The initial estimate of a 0.6-percent quarterly rise has been nudged up to 0.7 percent and now looks even better compared to the more modest rises seen in the US and euro zone in Q2. "As indicated by the timelier retail sales figures, consumer spending played a big role." ING economist James Knightley added that the higher estimate of GDP will "boost optimism on the economy". Although this is some modest growth it is still the fact that not enough constant capital dead labour in affect has not been destroyed to restore the rate of profit. As such the system is bound to hit trouble in the near future. As we know the capitalist system is not based on meeting so called demand in fact workers can never buy back what they create as this would mean the system wouldn’t be capitalist at all in fact. This is a crisis of profitability with the under lying crisis being caused by the law of the tendency of the rate of profit to fall which Karl Marx brilliantly described many years ago in his works on das capital in the 19th century. For the capitalist system to come out of recession a certain amount of constant capital needs to be destroyed to create space for new modes of production to sprout. The reason the recovery is so sluggish is due to the organic composition of capital and the simply fact there is still far too much constant capital to variable in a ratio form anyway. We are not out of the woods yet and any capitalist polititian calling this a real recovery should hold fire. Certainly in the UK much of this short term growth can be put down to the laying off of workers and the driving down of the surplus workers receive their wages in other wods increasing profits as a result. Capitalism is a system which invests for profits not to meet need so calling this a crisis of under consumption I don’t think is right as capitalism has never been about meeting the working class’s needs not now not ever. Understanding Marx’s 3rd law of capitalist motion is key to understanding that the system cannot be reformed or made to work for us. It simply must be replaced with a system planned to meet the mass’s needs before profits are even considered which under socialism they will become less and less relevant.

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.