Is an Underconsumptionist theory relative to today’s current crisis?

i received an interesting reply on my blog today in response to yesterdays post on Marx’s theory on the tendency for the rate of profit to fall. This is their reply. I’ll keep them nameless Justin case of any awkwardness. “No, it isn't. Firstly, Marx distinguishes between financial crises and economic crises. The former as he points out relates to crises that emanate from the circulation of money rather than capital. They emanate, therefore, in financial markets rather than in the real economy. A Stock Market, Bond market or Property Market crash would be an example. Marx points out those crises can remain within that sphere, or may spread out to affect the real economy i.e. through a Credit Crunch. But, such crises have nothing to do with the Tendency for the Rate of Profit to fall. But, the latter also has little or nothing to do with crises in the real economy either, crises that Marx describes as arising from an overproduction of capital. For one thing, Marx points out that although there is a minimum for wages, set by the Value of Labour Power, there is no minimum rate or amount of profit. Subjectively, of course, there may be some point at which capitalists decide to consume unproductively or speculate rather than invest, but such action Marx describes, in itself tends to cause accumulation to slow down, and the rate of profit to rise. A falling rate of profit is a long-term tendency, whereas crises are sharp ruptures. The former cannot be the cause of the latter. Marx sets out the very many counter tendencies to the Falling Rate of Profit, to an extent that it’s clear that in practice there is no reason why the Rate of Profit should fall. In fact, over the last 30 years its clear it has been rising sharply.” Let’s look at the whole Underconsumptionist theory if we will use my good comrade Bruce Wallace’s and his excellent blog at http://69.195.124.91/~brucieba/2013/03/18/does-the-cwi-have-an-underconsumptionist-position/ So here is an extract from a paper Bruce wrote to clarify his own thoughts on the issue: What is Over-Production? There has been an ongoing debate amongst Marxists since the death of the founder of scientific socialism in 1883 as to the meaning of his critique of capitalism. In terms of historical time, a not particularly lengthy period, of one hundred and twenty nine years, actually only some four to five generations, revolutionary socialists have tended towards two camps with various offshoots. One group has adhered to an interpretation of Marx’s critique of capitalism that the reason for capitalist crisis is that the working class does not receive the full fruits of their labour in wages. Surplus value, which equals profit, is the unpaid labour of the working class and therefore workers, the mass of the population, will have insufficient means to buy back all the commodities that capitalism produces. Therefore capitalist crisis is primarily caused by over-production of commodities for which there is an insufficient market i.e. in economic speak demand. Supporters of this view are called underconsumptionists. Other Marxists reject this view as simplistic and not based on a thorough understanding of Marx’s critique of capitalism and that the underconsumptionist position is, in fact, not a Marxist position at all, but a distortion of his ideas. Why should this be an important issue today? Does it really matter if one group of Marxists disagrees with another group over the interpretation of Marx’s critique of capitalism? Surely we are all opponents of capitalism and so what if we disagree over what causes capitalist crisis, surely the point is to overthrow the system? In fact this is probably one of the most important disputes in the history of the revolutionary movement. It not only deals with the fundamental meaning of Marxism but also has direct implications for theory, strategy, tactics and programme. It also impacts on how we view Marxist’s vision of the future socialist society. So this paper will hopefully attempt to address some of these issues in plain language without recourse to mathematics. The Manifesto Apparent support for the under-consumptionist position has been sought in the Communist Manifesto of 1848 by Karl Marx and Fredrik Engel’s where they state: ‘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, is 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 are destroyed. And why? Because there is too much civilization, too much means of subsistence, too much industry, too much commerce’. The Socialist Party of England and Wales Website has a commentary on the Manifesto which explains: ‘The Manifesto outlines how destructive periods of recession are inherent in capitalism. It appears that “too much” is produced, but the working class receives far less in wages than the value of the goods they produce. The “consumers” of today can no longer buy the products which they themselves, as workers, produced only yesterday’! Unfortunately this is reading something into the Manifesto which isn’t actually there. This is all that the Manifesto states: ‘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’. There is no mention at all that the destruction of productive forces is because, ‘The “consumers” of today can no longer buy the products which they themselves, as workers, produced only yesterday’! This is the classic underconsumptionist ‘common sense’ explanation of capitalist crisis projected onto the description of crisis by Marx and Engel’s in 1848. The founders of scientific socialism never stated, anywhere, that capitalist crisis is caused by the under-consumption of the ‘products’ of capitalism. And the reason that there isn’t an explanation in the Manifesto as to how crises of over-production occur, not one jot, is because in 1848 neither Marx nor Engel’s knew what the causes of over-production actually were. Their referral to over-production is purely a description of the form of capitalist crisis exhibited at the time, not an analysis of causation. What’s in a word? The word ‘product’ is not a description that Marx went on to use in his critique of capitalism in Capital. The word ‘product’ appears in the Manifesto in 1848 but that was before Marx’s intellectual labours uncovered the way that capitalism actually worked, but he only reached this conclusion in 1858 when he was compiling his Grundrisse notebooks. He discovered that capitalism produces commodities which can be bought and sold for a profit. A ‘product’ is a completely different thing and could be the outcome of the labour of a prehistoric caveman, which certainly wasn’t ever produced to make a profit. Marx dedicated the first chapter of volume one of Capital to ‘Commodities’. The reason for this is that Marx had discovered that commodities are the ‘cell form’ of capitalist production and any analysis of the system needed to start from there. What characterises the capitalist mode of production, unlike all other pre-existing modes of production, is the presentation of ‘an immense accumulation of commodities’ (Capital Vol I on the very first page!). This ‘minor’ terminological and historical blip being cleared up, what actually was Marx’s view of over-production? References http://69.195.124.91/~brucieba/2013/03/18/does-the-cwi-have-an-underconsumptionist-position/