[Marxism] Notes on the current crisis of capitalism

["Anthony Boynton" <anthony.boynton@xxxxxxxxx>]

[Marxism] Notes on the current crisis of capitalism



In response to my post on crises of overproduction Greg M. wrote,



"... but I do not understand how total production necessarily exceeds total
demand. It seems that capitalists must make some decisions in terms of how
much to produce based on some kind of analysis of market share. They don't
necessarily overproduce, but I understand how increased economy of scale to
undercut competition can in fact lead to overproduction. I just don't
understand how this is necessarily the case."



Little companies wet their thumb and stick it in the wind to determine
potential demand for their products and services, big capitalists have
research departments and planning departments and consultants up the ass to
help them predict potential future market size and share...But that does not
mean that they always, or usually guess right. Look at demand for SUVs. GM,
Ford and Chrysler made the wrong bet, Toyota, Honda and Nissan hedged their
bets and won.



All markets become saturated at some point. The automobile market in the
United States has been saturated since the 1950's. The total market has
increased incrementally in line with population growth. Demand in market
"niches" has moved up and down with oil prices, safety regulations, and
fashion.



Markets in the United States have been essentially saturated since the end
of the 1960's. However four factors kept them growing.



1)      The development of new markets through the application of military
technology to consumer uses (e.g. high tech).

2)      Population growth.

3)      Rising household income due to greater labor market participation by
women.



Rising household income, not rising individual income, occurred as labor
market participation rates increased even as real wages fell. What this
means is that more women went to work so household income could increase
even if the men (formerly the "sole" breadwinners) were earning less in real
(inflation adjusted terms).



At some point, probably in the 1990's, this trend stopped, and household
income has been falling ever since.



            4) Expansion of credit, as you note.



"As the consumption of consumer goods shrinks, the availability of

credit (fictitious capital) on easy terms increases in order to

stimulate consumption, a reflection of the artificial creation of

demand which you have already mentioned. Since this is an artificial

creation, and not a reflection of real demand, the overconsumption by the
masses, which you discussed earlier, is in reality a reflection of real
underconsumptionist tendencies. Thus the inability of people to make their
monthly payments, which is how the crisis

came into the open in the first place. Or am I totally off base here?"



In my view fictitious capital is NOT equal to credit. Credit is part of
fictitious capital, but not the whole of it. (See my post of the definition
of fictitious capital.)



Also it is a good idea to keep in mind what "supply" and "demand" mean in
economic terminology.



Supply includes those goods and services that are offered for sale in the
market. Supply does not include goods and services that are not offered for
sale. if you grow tomatose in your back yard, and eat them, they are not
part of supply (even though they are a substitute for supply and have a real
effect on supply and demand.)



Demand, according to bourgeois economics, is equal to the goods purchased at
a certain price (hence for these guys there is no possibility of an
imbalance between supply and demand, they are by definition equal!). I am
not sure if Marx ever clearly expressed an opinion on this, probably Mandel
did somewhere. HOWEVER, in my opinion demand is the amount of a particular
good or service that people are willing AND ABLE to buy at a given price at
a given time. (Actually you can bring the bourgeois economists definition
into agreement with this one if you take into account their definition of
market clearing price and their definition of profit.)



These terms are related to Marx's terminology of "exchange value" and "use
value". Goods and services have both. Use value is the intrinsic value of a
good or service (Marx did not write about services as far as I know), which
makes a person want to acquire or use that good or service. It does not
matter whether you or I think the thing has any useful purpose, it only
matters if someone on the planet does. Without a use value no good or
service will be exchanged.



However, use value has absolutely nothing to do with the price you pay.
Prices are expressions of social relations among people and the things
people produce and exchange. Prices are the momentary expression of
"exchange value" as it varies under the influence of supply and demand.
Exchange value boils down to the socially necessary (i.e. average) amount of
human labor required to produce the good or service in a given social
context (market).



SOOOO, if you go back to supply and demand, they do not refer to people's
needs, nor to fulfillment of people's needs. Supply and demand work through
exchange values, and are only a very imperfect reflection of people's needs
and desires for use values.



SO, SO, SO underconsumption is a real phenomenon related to use values. It
does not explain what happens in capitalist market relations, in my humble
opinion.



AND,  people can not make their monthly payment because capitalism has been
driving down real wages while driving up real prices. This is not
underconsumptionism, however. It is just getting royally screwed. And, I do
not think you are off base.



More later, Anthony
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