The theory of capitalist collapse

[robbo203]

There is an excellent collection of articles I came across recently explaining the nature of capitalist crises and critically examining the idea of capitalist collapse. The marxist theory of crises is based on the idea of disproportional or unbalanced growth; many on the left , however subscribe to quite a different theory, however - namely underconsumptionism or the notion that workers are increasingly unable to buy back the products of industry. In the Great Depression for example it was widely believed by various leftists that capitalism was facing imminent collapse. That history was not so obliging suggest there is something seriously wrong about their thinking.

This has massive implications. Obama for example is currently trying to push through congress a 900 billion dollar economic stimulus package to counter the effects of the worsening recession. The thinking behind this goes back to the old discredited idea that you can buy your way out of recession by giving workers more spending power - a variant of underconsumption theory. Marx dealt with this claim summarily by pointing out that if higher wages were being recommended as a way of averting a crisis then it has to be noted that every crisis is always preceded by a rapid growth in wages. In fact if anything Obama might be making an already bad situation worse by such reformist tinkering.

Anyway, have a look at these articles - I highly recommend them

http://trotfinder.blogspot.com/search/label/collapse%20of%20capitalism

[Tower of Bebel]

Thanks

There is an excellent collection of articles I came across recently explaining the nature of capitalist crises and critically examining the idea of capitalist collapse. The marxist theory of crises is based on the idea of disproportional or unbalanced growth; many on the left , however subscribe to quite a different theory, however - namely underconsumptionism or the notion that workers are increasingly unable to buy back the products of industry. In the Great Depression for example it was widely believed by various leftists that capitalism was facing imminent collapse. That history was not so obliging suggest there is something seriously wrong about their thinking.I think this way of thinking was typical of Second International Marxism (and therefor at least in some way also the Third International). Imperialism is the so called last stage of capitalism in which the class contradictions rise to such a high level that the newest (around the 1900's) developments lead to an inevitable era of wars and revolutions in which socialism will prevail. A certain discours within the Bolshevik party reflects this kind of reasoning:

Imperialism is moribund capitalism, capitalism which is dying but not dead. The essential feature of imperialism, by and large, is not monopolies pure and simple, but monopolies in conjunction with exchange, markets, competition, crises. It is therefore theoretically wrong to delete an analysis of exchange, commodity production, crises, etc., in general and to “replace” it by an analysis of imperialism as a whole. There is no such whole. There is a transition from competition to monopoly, and therefore the programme would be much more correct, and much more true to reality, if it retained the general analysis of exchange, commodity production, crises, etc., and had a characterisation of the growing monopolies added to it. In fact it is this combination of antagonistic principles, viz., competition and monopoly, that is the essence of imperialism, it is this that is making for the final crash, i.e., the socialist revolution.But this reasoning can also be found in Luxemburg's works and even that of renegades like Kautsky and Hilferding.

[robbo203]

Thanks
I think this way of thinking was typical of Second International Marxism (and therefor at least in some way also the Third International). Imperialism is the so called last stage of capitalism in which the class contradictions rise to such a high level that the newest (around the 1900's) developments lead to an inevitable era of wars and revolutions in which socialism will prevail. A certain discours within the Bolshevik party reflects this kind of reasoning:.

Yes but I was talking specifically about underconsumption theory - the idea that society cannot buy back in sufficient quantities the products of industry and that there is some hypothetical deficiency in purchasing power resulting in chronic industrial stagnation. Engels I think subscribed to something like an underconsumptionist theory when he talked of the productive powers growing geometrically and the the expansion of the market occuring only in an arithemetical fashioon. The basic idea was that the productive forces were outstripping the ability of society to buy back the products of industry. On the face of it this is absurd - why would capitalists want to invest in surplus capacity over and above what could be profitably sold on the market? But it is also theoretically suspect becuase it ignores the market for producer goods in trying to demonstrate that there is a gap between the ability of workers and capitalists to buy consumer goods and the prices of these goods. it assumes that investment in machinery and so on reduce the amount of money available for consumption purposes while not seeing that aggregate demand also includes the demand for producer goods. And of course it ignores the fact capitalism survived all previous crises when the self same arguments about the final imminent collapse of capitalism likewise surfaced.

These underconsumptionist ideas were rife within the Second International and many of its spokespersons like Kautsky made no bones of the fact that they expected the imminent collapse of capitalism. But the theory on which he based these predictions was quite false and had nothing to do with the marxian theory of crises

[Niccolò Rossi]

I'm not in a position to respond to the OP or the articles posted at this point in time, however I will make a few breif remarks:


Engels I think subscribed to something like an underconsumptionist theory when he talked of the productive powers growing geometrically and the the expansion of the market occuring only in an arithemetical fashioon.

More interestingly Marx himself subscribed to such a theory, at least in embryonic form, something he did not get a chance to elaborate more fully for two reasons:


The first is connected to the way Marx wanted to organize Capital and his greater study of the economy in which Marx explicitly abstracts from the concrete reality of the world market, envisaged that the part devoted to the world market and world crises would be dealt with last. Of course, he died before he could complete this task;
The second reason, which partially explains the first, is connected to the historical conditions of the period Marx was living through.

Some quotes here best demonstrate this claim (All quotes taken from the article: Theories of crisis, from Marx to the Communist International (http://en.internationalism.org/node/2761), ICC, International Review No. 22 (1988), all emphasis is that of the ICC):
For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeoisie and of its rule. It is enough to mention the commercial crises that by their periodical return put on its trial, each time more threateningly, the existence of the entire bourgeois society. In these crises a great part not only of the existing products, but also of the 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. 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 seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, to much industry, too much commerce....
And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented. (Marx, Manifesto of the Communist Party)
The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere.

The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, ie, to become bourgeois themselves. In one word, it creates a world after its own image....

Just as it has made the country dependent on the towns, so it has made barbarian and semi-barbarian countries dependent on the civilized ones, nations of peasants on nations of bourgeois, the East on the West. (ibid.)


As the mass of production grows, and consequently the need for extended markets, the world market becomes more and more contracted, fewer and fewer new markets remain available for exploitation, since every preceding crisis has subjected to world trade a market hitherto unconquered or only superficially exploited (Marx, Wage Labour and Capital)


The workers’ power of consumption is limited partly by the laws of wages, partly by the fact that they are only employed as long as their labor is profitable to the capitalist class. The ultimate reason for all real crises is always the poverty and restricted consumption of the masses faced with the tendency of the capitalist economy to develop the productive forces as if they had no limit than society’s absolute power of consumption.” (Marx, Capital Vol. III, Section 5)


On the face of it this is absurd - why would capitalists want to invest in surplus capacity over and above what could be profitably sold on the market?

Because capitalist production is not a rational and planned process. Individual capitals must not only continue to produce but must reinvest a portion of their capital in order to produce more efficiently outdoing his competitors and capturing a larger (or in the era of capitalist decadence - a larger portion) market.

[robbo203]

Some quotes here best demonstrate this claim (All quotes taken from the article: Theories of crisis, from Marx to the Communist International (http://en.internationalism.org/node/2761), ICC, International Review No. 22 (1988), all emphasis is that of the ICC):


For many a decade past the history of industry and commerce is but the history of the revolt of modern productive forces against modern conditions of production, against the property relations that are the conditions for the existence of the bourgeoisie and of its rule. It is enough to mention the commercial crises that by their periodical return put on its trial, each time more threateningly, the existence of the entire bourgeois society. In these crises a great part not only of the existing products, but also of the 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. 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 seem to be destroyed; and why? Because there is too much civilization, too much means of subsistence, to much industry, too much commerce....

And how does the bourgeoisie get over these crises? On the one hand by enforced destruction of a mass of productive forces; on the other, by the conquest of new markets, and by the more thorough exploitation of the old ones. That is to say, by paving the way for more extensive and more destructive crises, and by diminishing the means whereby crises are prevented. (Marx, Manifesto of the Communist Party)

The need of a constantly expanding market for its products chases the bourgeoisie over the whole surface of the globe. It must nestle everywhere, settle everywhere, establish connections everywhere.

The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate. It compels all nations, on pain of extinction, to adopt the bourgeois mode of production; it compels them to introduce what it calls civilization into their midst, ie, to become bourgeois themselves. In one word, it creates a world after its own image....

Just as it has made the country dependent on the towns, so it has made barbarian and semi-barbarian countries dependent on the civilized ones, nations of peasants on nations of bourgeois, the East on the West. (ibid.)


As the mass of production grows, and consequently the need for extended markets, the world market becomes more and more contracted, fewer and fewer new markets remain available for exploitation, since every preceding crisis has subjected to world trade a market hitherto unconquered or only superficially exploited (Marx, Wage Labour and Capital)


The workers’ power of consumption is limited partly by the laws of wages, partly by the fact that they are only employed as long as their labor is profitable to the capitalist class. The ultimate reason for all real crises is always the poverty and restricted consumption of the masses faced with the tendency of the capitalist economy to develop the productive forces as if they had no limit than society’s absolute power of consumption.” (Marx, Capital Vol. III, Section 5)

Because capitalist production is not a rational and planned process. Individual capitals must not only continue to produce but must reinvest a portion of their capital in order to produce more efficiently outdoing his competitors and capturing a larger (or in the era of capitalist decadence - a larger portion) market.

Yes, one or two of the above quotes - particularly the one from Capital vol III - do seem to smack of underconsumptionism. Nevertheless I dont think they necessarily signifiy that. After all Marx himself had specifically pointed out - i think in vol III itself - that those who think increased wages are the way to avert a crisis overlook that crisis are always heralded by rising wages. That is a direct refutation of underconsumption theory

I think the reference to the productive forces developing as if they had no limit is actually an allusion to the blind anarchical nature of capitalism in that it leds business to expand without regard to the demands of other businesses or sectors of industry, thus resulting in sectoral overaccumulation which then becomes generalised as a slump. If so then such a statement is entirely consistent with disproportionality theory. This theory does not deny the role of the "restricted consumption of the masses"; it only denies that this is the product of some in-built deficiency of purchasing power within capitalism which leaves productive capacity permananetly above what the market can buy.

I think that, on balance, the marxist theory of crises is very much a theory of disproportional growth and ,along with this , takes the view that crises are only ever periodic. Every slump creates the conditions for the restoration of profitable investment. This is radically different from underconsumptionist theory which logically holds that there must be a permanent of chronic oversupply of productive capacity in relation to market demand and that this is due to capitalists withdrawing money from a hypothetical consumption fund or capitalisation purposes, reducing as it were the total money available - aggregate demand - for consumption by this means. That is what underconsumption theory is really about and I dont think Marx ever subscribed to such a theory.

Yes he talked about crises getting worse and more frequent. Yes , he talked about the limited consumption of masses. But these things in themselves are enough to signify adherence to underconsumption theory and have to be seen in the the light of the very clear and unambiguous observations on the part of Marx about the inherently cyclical nature of capitalist development.

[Niccolò Rossi]

After all Marx himself had specifically pointed out - i think in vol III itself - that those who think increased wages are the way to avert a crisis overlook that crisis are always heralded by rising wages. That is a direct refutation of underconsumption theory

In what sense? Would you care to elaborate on this claim?


I think the reference to the productive forces developing as if they had no limit is actually an allusion to the blind anarchical nature of capitalism in that it leds business to expand without regard to the demands of other businesses or sectors of industry, thus resulting in sectoral overaccumulation which then becomes generalised as a slump.

What is the reference of which you speak specifically?


If so then such a statement is entirely consistent with disproportionality theory. This theory does not deny the role of the "restricted consumption of the masses"; it only denies that this is the product of some in-built deficiency of purchasing power within capitalism which leaves productive capacity permananetly above what the market can buy.

Likewise, "disproportionality theory" is entirely consistent with "underconsumption theory", the latter does not in any way deny the possibility or role of sectoral over-accumulation as inherent in the dynamics of capitalism. Rather, "underconsumptionist theory" moves beyond the realm of abstraction in which the internal dynamics of capitalism where investigated as by Marx, placing capitalism within it's concrete historical context.


I think that, on balance, the Marxist theory of crises is very much a theory of disproportional growth and ,along with this , takes the view that crises are only ever periodic. Every slump creates the conditions for the restoration of profitable investment.

What then becomes of historical materialism and both the possibility and need for the abolition of capitalism?

At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or - this merely expresses the same thing in legal term - with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. (Marx, Preface of a Contribution to the Critique of Political Economy) If all crises of capitalism are not only periodic but also provide the impetus for future growth and development within the framework of capitalism itself how can we talk of capitalist social relations as being fetters on the development of the means of production? What factor, what force is constricting and restraining their full development? The answer of the "underconsumptionists" is quite simply - the insufficiency of extra-capitalist markets to realise the entire mass of surplus-value produced within the framework of capitalism.


But these things in themselves are enough to signify adherence to underconsumption theory and have to be seen in the the light of the very clear and unambiguous observations on the part of Marx about the inherently cyclical nature of capitalist development.

Again, we must take note of the context in which Marx was writing, that is an ascendant capitalism still in the process of conquering the globe. The crises of capitalism as observed by Marx were the crises of a youthful and expanding capitalism where it was possible to abstract from the world market, a market which still possessed the capacity to realise the mass of surplus-value produced, that is, crises explained adequately by a "theory of disproportionality".

[robbo203]

In what sense? Would you care to elaborate on this claim?".

In the sense that underconsumption theory postulates a structural deficit in aggregate demand - that demand is reduced by diverting money away from a hypothetical consumption fund representing aggregate demand for the purpose of investing that money. The rise in wages that Marx spoke which is a prelude to economic downturn should presumably have prevented that downturn from hapopening according to underconsumption theory. That it does not, points to something faulty about the theory itself


What is the reference of which you speak specifically?.

The quote that you provided from Capital vol III where Marx talks of the " tendency of the capitalist economy to develop the productive forces as if they had no limit than society’s absolute power of consumption"


Likewise, "disproportionality theory" is entirely consistent with "underconsumption theory", the latter does not in any way deny the possibility or role of sectoral over-accumulation as inherent in the dynamics of capitalism. Rather, "underconsumptionist theory" moves beyond the realm of abstraction in which the internal dynamics of capitalism where investigated as by Marx, placing capitalism within it's concrete historical context..

No, it is not consistent with disporportionality theory. Granted there are some commonalities but there are also fundamental differences. Disproportionality theory denies that the problem has to do with any fundamental shortfall of aggregate demand and moreover emphasises the cyclical nature of crises. Each crisis creates the conditions that allow capitalism to overcome that crisis. This is far removed from what underconsumption theory claims - that there is a chronic structural problem of lack of sufficient demand which results in permanant stagnation


What then becomes of historical materialism and both the possibility and need for the abolition of capitalism?
At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or - this merely expresses the same thing in legal term - with the property relations within the framework of which they have operated hitherto. From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. (Marx, Preface of a Contribution to the Critique of Political Economy)
If all crises of capitalism are not only periodic but also provide the impetus for future growth and development within the framework of capitalism itself how can we talk of capitalist social relations as being fetters on the development of the means of production? What factor, what force is constricting and restraining their full development? The answer of the "underconsumptionists" is quite simply - the insufficiency of extra-capitalist markets to realise the entire mass of surplus-value produced within the framework of capitalism..

But read the quote again! Note what it says. It says the relations of production "fetter" the development of the productive forces. In other words they hold back or restrain them. That means they dont produce productive forces in excess of the capacity of the market to absorb the products of industry or at least if they do so inadvertently, this excess capacity is soon wiped out by the purgative effect of periodic crises. In fact on the face of it, why would any capitalist invest in productive forces if he or she seriously believed that that the goods produced could not be sold? This is what underconsumption theory is unable to explain.

So I read Marx's statement quite differently to you. What he is talking about is the potential of the material forces if organised on a communist basis. This potential is prevented from being materialised by capitalism itself most self evidently in the form of an economic crisis when you have the contradiction of "overproduction" alongside obvious human want


Again, we must take note of the context in which Marx was writing, that is an ascendant capitalism still in the process of conquering the globe. The crises of capitalism as observed by Marx were the crises of a youthful and expanding capitalism where it was possible to abstract from the world market, a market which still possessed the capacity to realise the mass of surplus-value produced, that is, crises explained adequately by a "theory of disproportionality".

But what are you saying here? I mean we have had a succession of crises since Marx died. Each one of these has occasioned prophets of doom predicting the imminent collapse of capitalism or, at the very least, economic stagnation without any end in sight. All of these prophets of doom have been proven wrong; capitalism has been able to come back from every crisis including every crisis in its decadent phase. Advocating a mechanistic fatalistic collapse theory in my opinion is not only based on erroneous theory but I think detracts from what needs to be done; to build up mass communist consciousness of an alternative to capitalism through the self organisation of the working class

[S. Zetor]

This particular quote ("The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses" etc.) was debated on Louis Proyect's Marxmail list just a while ago. Steve Palmer contributed:
Let's look at the quote in context. Here is the whole paragraph:

'Let us suppose that the whole of society is composed only of industrial capitalists and wage-workers. Let us furthermore disregard price fluctuations, which prevent large portions of the total capital from replacing themselves in their average proportions and which, owing to the general interrelations of the entire reproduction process as developed in particular by credit, must always call forth general stoppages of a transient nature. Let us also disregard the sham transactions and speculations, which the credit system favours. Then, a crisis could only be explained as the result of a disproportion of production in various branches of the economy, and as a result of a disproportion between the consumption of the capitalists and their accumulation. But as matters stand, the replacement of the capital invested in production depends largely upon the consuming power of the non-producing classes; while the consuming power of the workers is limited partly by the laws of wages, partly by the fact that they are used only as long as they can be profitably employed by the capitalist class. The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit.'

It seems there's something for everyone here: a 'crisis could only [ONLY!] be explained as the result of a disproportion of production in various branches of the economy, and as a result of a disproportion between the consumption of the capitalists and their accumulation.' In this sentence it's disproportion that is the ONLY explanation; in the next it's underconsumption which is the ULTIMATE cause. We have to make sense of these two adjacent sentences and the entire paragraph - we can't just pluck out the piece that supports an argument and ignore the rest that doesn't.

The point Marx is making is that workers consumption CANNOT provide a solution to these disproportions and never can because, by definition, they don't buy means of production or luxuries (capitalists' consumption). That's all.

As for the falling rate of profit (FROP), Marx described it:
'This is in every respect the most important law of modern political economy, and the most essential for understanding the most difficult relations. It is the most important law from the historical standpoint. It is a law which, despite its simplicity, has never before been grasped and, even less, consciously articulated.' Grundrisse. Ten years later, in a letter to Engels describing the contents of Book 3, he writes: 'This is one of the greatest triumphs over the pons asini of all previous political economy.' He devoted the whole of Part III of Book 3 to the law, 150 pages. If he thought underconsumptionism was the way to go, why didn't he write a chapter or two saying so? Why would he criticise Malthus for his underconsumptionism yet accept the same theory himself? When Marx praises Rodbertus it is for his writing on rent, not on underconsumption.

It seems very clear that Marx did not entertain underconsumptionism.

http://archives.econ.utah.edu/archives/marxism/2009w03/msg00126.htm
Marx himself writes in Capital vol. 2 that
It is sheer tautology to say that crises are caused by the scarcity of effective consumption, or of effective consumers. The capitalist system does not know any other modes of consumption than effective ones, except that of sub forma pauperis or of the swindler. That commodities are unsaleable means only that no effective purchasers have been found for them, i.e., consumers (since commodities are bought in the final analysis for productive or individual consumption). But if one were to attempt to give this tautology the semblance of a profounder justification by saying that the working-class receives too small a portion of its own product and the evil would be remedied as soon as it receives a larger share of it and its wages increase in consequence, one could only remark that crises are always prepared by precisely a period in which wages rise generally and the working-class actually gets a larger share of that part of the annual product which is intended for consumption. From the point of view of these advocates of sound and “simple” (!) common sense, such a period should rather remove the crisis. It appears, then, that capitalist production comprises conditions independent of good or bad will, conditions which permit the working-class to enjoy that relative prosperity only momentarily, and at that always only as the harbinger of a coming crisis.
http://www.marxists.org/archive/marx/works/1885-c2/ch20_01.htm
and
"Over-production of capital, not of individual commodities — although over-production of capital always includes over-production of commodities — is therefore simply over-accumulation of capital." http://www.marxists.org/archive/marx/works/1894-c3/ch15.html
For those interested, it's also worth checking out Henryk Grossman's Law of the Accumulation and Breakdown from 1929. Grossman argues against Rosa Luxemburg's and others' underconsumptionist views.

http://www.marxists.org/archive/grossman/1929/breakdown/index.htm

[robbo203]

It seems very clear that Marx did not entertain underconsumptionism.


I agree. But I dont think the falling rate of profit can be adduced as an explanation of crises either. As one of the articles I posted above makes clear the theory of the falling rate of profit has to to do with the rising organic composition of capital. Such changes in the composition of capital are relatively slow on an industry wide basis and so cannot really account for the much shorter time frame in which crises develop. There are, in any case, the well known counteracting tendencies that Marx referrred to which cast doubt on this particular factor as a cause of crises. That does not mean profits do not fall in an economic downturn. However, the fall in profits that goes with a crisis is a symptom of (relative) over-production which through a feedback process - the laying off of workers, reduced demand for capital goods etc - then contributes to the crisis leading to generalised overproduction


So I am not denying that falling profits and limited or restricted consumption plays a role in crises - obviously. But they dont actually act as the efficient cause of crises. The sole explanatory cause in that sense from the marxian perspective as I understand it is relative over production or disproportional growth brought on by the anarchical and blind process of capitalist development

[Niccolò Rossi]

Robbo, I think we need to agree on some common terms here, it seems to me we are discussing different things. I will explore this below:


After all Marx himself had specifically pointed out - i think in vol III itself - that those who think increased wages are the way to avert a crisis overlook that crisis are always heralded by rising wages. That is a direct refutation of underconsumption theory / In the sense that underconsumption theory postulates a structural deficit in aggregate demand - that demand is reduced by diverting money away from a hypothetical consumption fund representing aggregate demand for the purpose of investing that money. The rise in wages that Marx spoke which is a prelude to economic downturn should presumably have prevented that downturn from hapopening according to underconsumption theory. That it does not, points to something faulty about the theory itself

(I hope you don't mind me combining your quotes here to make the argument more coherent)

The fact that “crisis are always heralded by rising wages” is in no way a refutation of 'underconsumptionism' as I am arguing it. The aggregate wages of the working class, aggregate surplus-value extracted by the capitalist class and the aggregate constant capital within the confines of purely capitalist social relations can be expressed as V, S and C, respectively. The aggregate value of all commodities produced within the given social relations are equal to V + C + S, or rather V + S given that C can be itself reduced to V + S. From this we can see immediately that the working class can only buy back, that is, realise the value of a portion of the mass of commodities: V. Likewise, given that competition on the market forces capitalists to constantly re-invest a portion of the surplus-value extracted into new technologies for producing more efficiently, the entirety of the surplus-value extracted is not spent on consumption by the bourgeoisie, a portion of this must be re-invested in improved production methods.

Given this, a 'demand gap' arises between the value of the mass of commodities produced within the social relations of capitalism and the ability for this mass of value to be realised within this framework. The 'demand gap' can not be filled through rises in workers wages or state spending. This is because the first would simply mean a reduction in the mass of surplus value produced, something the capitalist class is constantly pressured to reduce by the forces of competition; The second requires the expenditure of state income derived fundamentally from taxes and profits on nationalised industries, inevitably drawn from the mass of V and S. Another potential solution is the recourse to credit, however debt can never be a permanent solution to the issue of realisation as we are finding out with the current economic crisis (See: The most serious economic crisis in the history of capitalism (http://en.internationalism.org/ir/2009/136/crisis), ICC, IR no. 136, 2009). The demand gap can only be really filled by consumers outside of capitalist social relations, the sale of commodities produced within the framework of capitalism on extra-capitalist markets. When these markets have been exhausted relative to the needs of capitalism, when capitalism has generalised itself globally, the era of capitalist decadence, it's permanent crisis, begins.


I think the reference to the productive forces developing as if they had no limit is actually an allusion to the blind anarchical nature of capitalism in that it leds business to expand without regard to the demands of other businesses or sectors of industry, thus resulting in sectoral overaccumulation which then becomes generalised as a slump.


Let us examine the quote again:
The ultimate reason for all real crises is always the poverty and restricted consumption of the masses faced with the tendency of the capitalist economy to develop the productive forces as if they had no limit than society’s absolute power of consumption. (Marx, Capital Vol. III, Section 5)Now, you can of course read into the quote whatever meaning you like, however this does not in any way make it true. I think the above passage is very clear. The capitalist economy is constantly revolutionising the means of production in order to produce more efficiently and hence on an ever expanding scale. It is this tendency toward development, constantly pushed forward by the anarchy of market that causes capitalists to "invest in surplus capacity over and above what could be profitably sold on the market".


No, it is not consistent with disporportionality theory. Granted there are some commonalities but there are also fundamental differences. Disproportionality theory denies that the problem has to do with any fundamental shortfall of aggregate demand and moreover emphasises the cyclical nature of crises. Each crisis creates the conditions that allow capitalism to overcome that crisis. This is far removed from what underconsumption theory claims - that there is a chronic structural problem of lack of sufficient demand which results in permanant stagnation

This is a mistake on my part. When I said in my above post " 'disproportionality theory' is entirely consistent with 'underconsumption theory' ", I made a grievous error. The line should read: "The idea that capitalist crises can be the result of a disproportion in growth and sectoral overaccumulation is entirely consistent with 'underconsumption theory' ". This I actually state in the following line: "the latter does not in any way deny the possibility or role of sectoral over-accumulation as inherent in the dynamics of capitalism". My apologises for the confusion.


But read the quote again! Note what it says. It says the relations of production "fetter" the development of the productive forces. In other words they hold back or restrain them. That means they dont produce productive forces in excess of the capacity of the market to absorb the products of industry or at least if they do so inadvertently, this excess capacity is soon wiped out by the purgative effect of periodic crises....


So I read Marx's statement quite differently to you. What he is talking about is the potential of the material forces if organised on a communist basis. This potential is prevented from being materialised by capitalism itself most self evidently in the form of an economic crisis when you have the contradiction of "overproduction" alongside obvious human want.

This leads us to the most nonsensical conclusions. For the former half of the quote: If capitalist relations of production act as a fetter on the development of the productive forces since the day it is born, can we then conclude that the epoch of social revolution has been open since the 17th century?


In the case of the latter I will quote the ICC on this matter from the article Understanding the Decadence of Capitalism – Part 5: “Defining capitalism’s rottenness by demonstrating the superiority of socialism demonstrates nothing at all, and certainly does not answer the question of why, when and how, a society enters into decline.”


In fact on the face of it, why would any capitalist invest in productive forces if he or she seriously believed that that the goods produced could not be sold? This is what underconsumption theory is unable to explain.


This is incorrect for two reasons. One, “underconsumption theory” (I am here, and everywhere else referring explicitly to that of Rosa Luxemburg and not that of Sismondi, Rodbertus, Malthus or any one else the critics of such a theory are eager to slander us with) in no way suggests that as a rule the goods of any individual capitalist can not be sold in their entirety. On the contrary, it is the mass of surplus-value produced within the social relations of capitalism itself that can not be realised in its entirety.

Secondly, the inherent nature of capitalism, a system based fundamentally on the law of value and the anarchy of the market, causes individual capitalists to act competitively and irrationally. Again, I think the quote from Capital Vol. 3 above explains this very clearly:

The ultimate reason for all real crises is always the poverty and restricted consumption of the masses faced with the tendency of the capitalist economy to develop the productive forces as if they had no limit than society’s absolute power of consumption. (Marx, Capital Vol. III, Section 5)

But what are you saying here? I mean we have had a succession of crises since Marx died. Each one of these has occasioned prophets of doom predicting the imminent collapse of capitalism or, at the very least, economic stagnation without any end in sight. All of these prophets of doom have been proven wrong; capitalism has been able to come back from every crisis including every crisis in its decadent phase.


However, it is not the underconsumptionists (here I am specifically referring to the ICC, I know of no other groups who hold such a theory) making these claims and prophesies about the “immanent collapse of capitalism”. On the contrary, the ICC has, like Rosa Luxemburg before them, defended not the immanent collapse of capitalism (and the victory of socialism) but on the contrary an increasing slide into barbarity and decomposition. The choice of the working class in this epoch is between socialism or barbarism, between world war, poverty and attacks of the standard of living, state repression and totalitarianism, environmental destruction or the liberation of humanity.


Aside from this your argument is fallacious. If I roll a die 9 times and come up with the number 6 all 9 times this in no way changes the probability of getting say the number 1 on my 10th role. (I am here not defending the “prophets of doom predicting the imminent collapse of capitalism”, I am merely pointing out the logic or your argument).



Advocating a mechanistic fatalistic collapse theory in my opinion is not only based on erroneous theory but I think detracts from what needs to be done; to build up mass communist consciousness of an alternative to capitalism through the self organisation of the working class


Whilst a theory of a “mechanistic fatalistic collapse” does indeed lead to erroneous political conclusions, a theory of the decadence of capitalism is fundamental to any form of political organisation in this era, without which revolutionaries are left incapable of understanding the modern nature of parliamentarianism, unions, national liberation and anti-imperialist struggles, frontism etc.

[robbo203]

Let us examine the quote again:
The ultimate reason for all real crises is always the poverty and restricted consumption of the masses faced with the tendency of the capitalist economy to develop the productive forces as if they had no limit than society’s absolute power of consumption. (Marx, Capital Vol. III, Section 5)
Now, you can of course read into the quote whatever meaning you like, however this does not in any way make it true. I think the above passage is very clear. The capitalist economy is constantly revolutionising the means of production in order to produce more efficiently and hence on an ever expanding scale. It is this tendency toward development, constantly pushed forward by the anarchy of market that causes capitalists to "invest in surplus capacity over and above what could be profitably sold on the market"..
That capitalists invest in productive capacity that is capable of producing more than what can be profitably sold on the market is not deniend. Indeed that is precisely what is meant when I said "blind anarchical nature of capitalism... leads business to expand without regard to the demands of other businesses or sectors of industry, thus resulting in sectoral overaccumulation which then becomes generalised as a slump." But this is not the issue. The issue is whether capitalism permanently overproduces in relation to what the market can absord. Clearly it does not and the function of crises is to periodically purge the system of surplus capacity. I repeat: no capitalist would knowingly invest capital in industry if they thought the commodities produced as a result could not be profitably sold. Investment decisions are made in the expectation of profit. Becuase these decisions are made in isolation from the investment decisions of other capitalists the outcome is disproportional growth; sectoral overaccumulation. Thus happens despite and not becuase of the intentions of capitalists


This is a mistake on my part. When I said in my above post " 'disproportionality theory' is entirely consistent with 'underconsumption theory' ", I made a grievous error. The line should read: "The idea that capitalist crises can be the result of a disproportion in growth and sectoral overaccumulation is entirely consistent with 'underconsumption theory' ". This I actually state in the following line: "the latter does not in any way deny the possibility or role of sectoral over-accumulation as inherent in the dynamics of capitalism". My apologises for the confusion..
Well no this still does not get to the nub of the matter. Underconsumption theory is talking about an inbuilt structural deficiency of purchasing power within capitalism based on the hypothetical notion of a consumption fund. Investment is held to reduce the extent of this fund by drawing money away from consumption purposes for investment purposes so that there is a permanant discrepancy between prices and purchasing power. Capitalist and workers are unable to buy back the full output of industry and have to be helped to do so by, for example, the state spending more money (deficit financing). Sectoral overacummulation as far as underconsumption theory is concerned is neither here nor there. It is a statement about output as a whole in relation to aggregate demand


This leads us to the most nonsensical conclusions. For the former half of the quote: If capitalist relations of production act as a fetter on the development of the productive forces since the day it is born, can we then conclude that the epoch of social revolution has been open since the 17th century?
In the case of the latter I will quote the ICC on this matter from the article Understanding the Decadence of Capitalism – Part 5: "Defining capitalism’s rottenness by demonstrating the superiority of socialism demonstrates nothing at all, and certainly does not answer the question of why, when and how, a society enters into decline."
.
I dont see it this way. Capitalism becomes decadent or reactionary once the productive forces have developed to the point at which communism becomes feasible. This is I think what lies behind the quote from the Critique of Political Economy when it says . From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. Saying the productive forces are fettered means they are held back. Capitalists dont invest in more productive forces becuase the market does not permit this even if the need for expanded production is there. That is the only sensible way in which you could interpet the above passage. It doesnt mean that the epoch of social revolution was open since the 17th century. Although the first commecial crisis was reputedly in the early 19th century according to Engels, this does not mean the capitalist relations did not act to restrain the productive forces even then but these relations at that stage had still on balance a progressive role to play in developing the forces of production. Today they no longer have a progressive role to play since the productive forces are more than adequate to sustain communism


This is incorrect for two reasons. One, "underconsumption theory" (I am here, and everywhere else referring explicitly to that of Rosa Luxemburg and not that of Sismondi, Rodbertus, Malthus or any one else the critics of such a theory are eager to slander us with) in no way suggests that as a rule the goods of any individual capitalist can not be sold in their entirety. On the contrary, it is the mass of surplus-value produced within the social relations of capitalism itself that can not be realised in its entirety. .
Yes but nobody is suggesting that the goods of any individual capitalist cannot be sold in their entirety. Even despite recession some capitalist concerns continue to do rather nicely thank you very much. What we are taling about here is the econoimy as a whole


Secondly, the inherent nature of capitalism, a system based fundamentally on the law of value and the anarchy of the market, causes individual capitalists to act competitively and irrationally. Again, I think the quote from Capital Vol. 3 above explains this very clearly:
The ultimate reason for all real crises is always the poverty and restricted consumption of the masses faced with the tendency of the capitalist economy to develop the productive forces as if they had no limit than society’s absolute power of consumption. (Marx, Capital Vol. III, Section 5)
.

Agreed but capitalism always works to retrospectively purge itself of the outcome of the irrational decisons made by capitalists

However, it is not the underconsumptionists (here I am specifically referring to the ICC, I know of no other groups who hold such a theory) making these claims and prophesies about the "immanent collapse of capitalism". On the contrary, the ICC has, like Rosa Luxemburg before them, defended not the immanent collapse of capitalism (and the victory of socialism) but on the contrary an increasing slide into barbarity and decomposition. The choice of the working class in this epoch is between socialism or barbarism, between world war, poverty and attacks of the standard of living, state repression and totalitarianism, environmental destruction or the liberation of humanity.

Not quite true. Read the article on Luxemburg that I posted above and in particular her address at the founding Congress of the German Communist Party

.

Aside from this your argument is fallacious. If I roll a die 9 times and come up with the number 6 all 9 times this in no way changes the probability of getting say the number 1 on my 10th role. (I am here not defending the "prophets of doom predicting the imminent collapse of capitalism", I am merely pointing out the logic or your argument).
Whilst a theory of a "mechanistic fatalistic collapse" does indeed lead to erroneous political conclusions, a theory of the decadence of capitalism is fundamental to any form of political organisation in this era, without which revolutionaries are left incapable of understanding the modern nature of parliamentarianism, unions, national liberation and anti-imperialist struggles, frontism etc.

What you are saying here is that because the prophets of doom , of capitalism's imminent collapse have been shown to be wrong 9 times this does not mean they might not get it right on the 10th time. It is possible but the colapse if it comes will not be for the reasons they put forward - notably underconsumptionism. There is no fatal defect in capitalism in that regard. It would be I suspect for quite another set of reasons - perhaps external or or environmental factors - that capitalism might collapse. The point is not to wait for or depnd upon capitalism collapsing but to organise politically to get rid of it.

[Alf]

I think Niccolo Rossi has made a very good defence of Luxemburg's theory. I just wanted to say that I don't think it's correct to call her theory 'underconsumptionist' - rather she develops Marx's theory of overproduction, which is not quite the same thing.

I'm pretty sure Luxemburg herself explicity rejected the idea of 'underconsumptionism', although I would need to check that. In any case, when Robbo makes the following (correct) point:

"After all Marx himself had specifically pointed out - i think in vol III itself - that those who think increased wages are the way to avert a crisis overlook that crisis are always heralded by rising wages. That is a direct refutation of underconsumption theory".

He may be refuting underconsumptionism, but not Luxemburg. The idea that the crisis of overproduction can be overcome by raising wages is advocated by Stalinists, Keynesians, etc, but it was never Luxemburg's idea. She was continuing from where Marx left off when he pointed out that the source of overproduction lies in the very relationship between wage labour and capitalist, in the very production of surplus value, which means that the workers are always producing over and above their effective demand. Raising wages doesn't do away with the wage labour relation, and unless the capitalists can make up for it by increasing productivity and/or expanding their markets, they will encounter insuperable problems.

[iraqnevercalledmenigger]

Interesting article from Dunayevskaya on Luxemburg and Accumulation:

http://www.marxists.org/archive/dunayevskaya/works/1943/letter-luxemburg.htm

[Niccolò Rossi]

It has been some time since I made my last post in this thread. I will however attempt a reply to Robbo's most recent post.


The issue is whether capitalism permanently overproduces in relation to what the market can absord. Clearly it does not and the function of crises is to periodically purge the system of surplus capacity.

I do not see anything "clear" about this statement at all.


I repeat: no capitalist would knowingly invest capital in industry if they thought the commodities produced as a result could not be profitably sold. Investment decisions are made in the expectation of profit.

In this you are entirely correct. However, the permanent crisis of overproduction in no way prevents the realisation of the entire surplus value of the commodities of a given capitalist. Here I reproduce a portion of Communism: Not a nice idea but a material necessity, Vol 1. published by the ICC:
What the workers in fact produce, is surplus-value. So long as they produce it, they are able to consume. As soon as they cease [to produce it], their consumption ceases, because their production ceases. But that they are able to consume is by no means due to their having produced an equivalent for their consumption. On the contrary, as soon as they produce merely such an equivalent, their consumption ceases, they have no equivalent to consume. Their work is either stopped or curtailed, or at all events their wages are reduced. In the latter case—if the level of production remains the same—they do not consume an equivalent of what they produce. But they lack these means not because they do not produce enough, but because they receive too little of their product for themselves.
By reducing these relations simply to those of consumer and producer, one leaves out of account that the wage-labourer who produces and the capitalist who produces are two producers of a completely different kind, quite apart from the fact that some consumers do not produce at all. Once again, a contradiction is denied, by abstracting from a contradiction which really exists in production. The mere relationship of wage-labourer and capitalist implies:
1. that the majority of the producers (the workers) are nonconsumers (non-buyers) of a very large part of their product, namely, of the means of production and the raw material;
2. that the majority of the producers, the workers, can consume an equivalent for their product only so long as they produce more than this equivalent, that is, so long as they produce surplus-value or surplus-product. They must always be over-producers, produce over and above their needs, in order to be able to be consumers or buyers within the limits of their needs. (Theories of Surplus Value, Chapter XVII: Ricardo’s Theory of Accumulation and a Critique of it, 12. Contradictions Between Production and Consumption under Conditions of Capitalism. Over-production of the Principal Consumer Goods Becomes General Over-production)


In short, because the capitalist extracts surplus value from the worker, the worker always produces more than he can buy back. Of course, this is not a problem from the point of view of the individual capitalist, because he can always find a market with some other capitalist's workers; and the bourgeois political economist is likewise prevented by his class blinkers from seeing the problem from the point of view of the total social capital. But as soon as it is grasped from this standpoint ... then the problem indeed becomes a fundamental one. Marx explains in the Grundrisse:
Actually, the relation of one capitalist to the workers of another capitalist is none of our concern here. It only shows every capitalist's illusion, but alters nothing in the relation of capital in general to labour. Every capitalist knows this about his worker, that he does not relate to him as producer to consumer, and [he therefore] wishes to restrict his consumption, i.e. his ability to exchange, his wage, as much as possible. Of course he would like the workers of other capitalists to be the greatest consumers possible of his own commodity. But the relation of every capitalist to his own workers is the relation as such of capital and labour, the essential relation. But this is just how the illusion arises -- true for the individual capitalist as distinct from all the others -- that apart from his workers the whole remaining working class confronts him as consumer and participant in exchange, as money-spender, and not as worker. It is forgotten that, as Malthus says, 'the very existence of a profit upon any commodity pre-supposes a demand exterior to that of the labourer who has produced it', and hence the demand of the labourer himself can never be an adequate demand. Since one production sets the other into motion and hence creates consumers for itself in the alien capital's workers, it seems to each individual capital that the demand of the working class posited by production itself is an 'adequate demand'. On one side, this demand which production itself posits drives it forward, and must drive it forward beyond the proportion in which it would have to produce with regard to the workers; on the other side, if the demand exterior to the demand of the labourer himself disappears or shrinks up, then the collapse occurs. - (Grundrisse, Notebook IV, Circulation Process of Capital, Reproduction and Accumulation of Capital)
Underconsumption theory is talking about an inbuilt structural deficiency of purchasing power within capitalism based on the hypothetical notion of a consumption fund.

Your use of the word "hypothetical" seems to indicate you believe such a "consumption fund" to be fictitious. Would you care to elaborate on this claim?


Capitalist and workers are unable to buy back the full output of industry and have to be helped to do so by, for example, the state spending more money (deficit financing).

The state can not to fill the 'demand gap' created by capitalist overproduction because ultimately the state derives the funds to pay for this from within the framework of capitalism itself, essentially taxes on the income of capitalists and workers.


I dont see it this way. Capitalism becomes decadent or reactionary once the productive forces have developed to the point at which communism becomes feasible.

This is foreign to the method of Marx. For Marx a mode of production is decadent when it's social relations 'from forms of development of the productive forces ... turn into their fetters'. Whilst for the capitalist mode of production the maturation of the material conditions for communism occurred simultaneously with the opening of capitalism's permanent crisis as part of the same process of capitalism's global generalisation, this is in no way a general rule as you seem to indicate.


Saying the productive forces are fettered means they are held back.

Correct, however you seem to argue that at the point where the material conditions for communism have been developed, capitalism becomes decadent because the development of the productive forces is held back with reference to what would be possible under communism (something which is now objectively possible). I think however Marx's method is quite clear in that this process of the relations of production coming to fetter the development of the productive forces is a process internal to the mode of production, in other words, the epoch of social revolution opens when the current mode of production is not longer able to sustain the development of the productive forces it is and was objectively capable of doing so.

[John Lenin]

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