Re: Underconsumption

["Charles Brown" <CharlesB@xxxxxxxxxxxxxxxxxxxxx>]

>>> jdevine@xxxxxxxxxxxxxxx 03/22/01 12:02PM >>>
[was: Re: [PEN-L:9306] Re: Re: Japan]

I'm familiar with the quotes below, which lean toward an
"underconsumptionist" interpretation of Marx's crisis theory. I think that
it represents only one part of his theory, which unfortunately was never
finished or made into a coherent whole. (See Simon Clarke's 1993 book,
MARX'S THEORY OF CRISIS, published by Macmillan.)

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CB: Thanks for that reference.

On the contradictory or dialectical unity of overproduction and the law of the tendency of the rate of profit to fall, Rudy Fichtenbaum ( who has posted to this list) says in "Did Marx Have a Theory of the Business Cycle" ( Nature, Society and Thought Vol. 1, No. 2 1988):

"A dialectical view which takes in to account Marx's fundamental method of research shows that as unified consistent theory of the business cycle is contained in Marx's writings. Cyclical crises, according to Marx, were reflections fo the fundamental contradiction of capitalism resulting in the law of the tendency of the rate of profit to fall. However, this does not in any way contradict the fact that these crises are also crises of overproduction resulting from the inability to realize the goods which have been produced. Rather, business cycles express the dialectical relationship between "the law as such" and "counteracting tendencies", which together give rise to the "internal contradictions of the law" expressing themselves as crises of overproduction."

Fichtenbaum demonstrates this by more specific and complete references to Marx's work in the full article, of course. He also discusses the fragmentary nature  of the Marx's writing on the subject.

By the way, I also, pay attention to the fact that Marx left this business cycle theory to volume III and even there unclear, and just incomplete. I don't think Marx did this accidentally: he didn't consider business cycle explanation and theory central to his political economic project.  I think this means that for Marxist economics business cycle theory is not an important task.  Afterall, business cycle theory's practice can only be concerned with influencing the business cycle. Marxism attitude toward the business cycle is that we need to abolish capitalism and establish socialism in order to end the business cycle, not tweak it with state-monopoly or Keynesian fiscal or monetarist policies based on our understanding of the contradictions that cause it.

On what you say following isn't it also true that the limited consuming power of society as a whole , limited to less than the total value of commodities produced, rooted in the fact that the fundamental facts of surplus  value, in that the great mass of workers all produce more value ( surplus value) than they are paid in wages , of course ?The capitalists who get the surplus value cannot or do not buy all especially the individual consumption commodities, they don't purchase the "surplus"commodities corresponding to the surplus value produced, so there is an inevitable realization problem lurking by the very operation of extraction of surplus value. This is an expression of the contradiction of social production and private appropriation. There's a better quote in Vol. III saying this , but I have lost track of it.

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The way I interpret the
role of underconsumption (in _my_ theory, not Marx's) is that it has two
possible roles:

(1) in an economic boom, accumulation can go "too far" relative to consumer
spending, due to wages stagnating relative to labor productivity, so that
the boom becomes increasingly unstable (since investment spending and
credit-based spending, especially on luxuries, are more unstable than
consumption of necessities not bought on credit, and because investment
creates new capacity that must be utilized). This theory makes sense in a
"labor abundant" epoch, as with the current "race to the bottom."

(2) after the boom collapses, the economy may fall into what I call an
"underconsumption trap," where individual capitalists strive to deal with
realization problems by cutting wages and speeding up (or stretching out)
production, which simply makes underconsumption problems worse on the
aggregate level. Accumulation might be encouraged, but is blocked by unused
capacity, excessive corporate debt, and the resulting pessimism about
future profitability. (These three interact and reinforce each other.) This
is likely to be combined with what Irving Fisher called a debt-deflation
depression.

The real world is more complicated than in the model, especially when you
bring in international economic and political relations, but see my article
at http://bellarmine.lmu.edu/~JDevine/depr/D0.html. In "labor scarce"
situations, theory #1 doesn't apply, by the way. Something more like Marx's
original falling rate of profit theory applies.

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CB: In Marx's scheme, isn't the world market , international economic relations, one of the counteracting influences to the law of the tendency of the rate of profit to fall ?