Crisis of overproduction

[bloody_capitalist_sham]

Capitalism, as a historical stage of human development, has done unbounded good for human society. Through the mechanisms of exploitation to generate surplus value, the capital gained from workers was able to be pumped back into the economy to develop new technology.

Surely, we know that this was not done for “humanity” it was done by the capitalists in an attempt to ensure their own survival from each other. The competition between capitalists meant that ever greater productive forces were made, in the hope that each capitalist could ensure their own survival.

This is an economy driven by higher and higher profits, it is the dynamic of capitalism.

However, from this, in capitalism, there remains a inherent “crisis of overproduction”. Simply put, the workers, (who are paid the value of what they need to live on) are not endowed with enough money to ever be able to buy as much as they produce.

Leaving commodities needing to be thrown away in order to maintain capitalist production.

This has led, to massive world wide debt (the debtor nations over the third and second world, and now some first world countries), massively bloated military expenditure, and a massively unsustainable state machinery which is there in order to try and compensate for the crisis when they do arise.

Because capitalism cannot simply give away the products it would normally waste, since that would infringe on the price and markets, it means that the workers can never receive as much as they put in.

What i want to know, is how does socialism/communism solve the crisis of overproduction?

And what do the cappies think about this concept?

[jaycee]

simply put, communism will overcoem the crisis of overproduction by abolishing wage labour. Overproduction is as you say inherent in the capitalist system by overthrowing capitalism we overcome this crisis, production becomes based on need not profit and those who cannot afford to buy te surplus now will not have to 'buy' anything but will simply own it, as evrything is held in common.

Sorry for being overly simplistic but I fail to see what the problem is, from a marxist perspective

[colonelguppy]

Capitalism, as a historical stage of human development, has done unbounded good for human society. Through the mechanisms of exploitation to generate surplus value, the capital gained from workers was able to be pumped back into the economy to develop new technology.

Surely, we know that this was not done for “humanity” it was done by the capitalists in an attempt to ensure their own survival from each other. The competition between capitalists meant that ever greater productive forces were made, in the hope that each capitalist could ensure their own survival.

This is an economy driven by higher and higher profits, it is the dynamic of capitalism.

agreed, for the most part.


However, from this, in capitalism, there remains a inherent “crisis of overproduction”. Simply put, the workers, (who are paid the value of what they need to live on) are not endowed with enough money to ever be able to buy as much as they produce.

Leaving commodities needing to be thrown away in order to maintain capitalist production.

or, like they do most of the time in real life, they'll lower the price, which reduces incentive to produce, thus automatically lowering production.


This has led, to massive world wide debt (the debtor nations over the third and second world, and now some first world countries), massively bloated military expenditure, and a massively unsustainable state machinery which is there in order to try and compensate for the crisis when they do arise.

this is caused by misuse of keynesain eoconomic policy, not any sort of overproduction crisis.


Because capitalism cannot simply give away the products it would normally waste, since that would infringe on the price and markets, it means that the workers can never receive as much as they put in.

it's not an either or proposition, there is a whole range of prices between "people can't afford it" and "free".


What i want to know, is how does socialism/communism solve the crisis of overproduction?

who ever is commanding the economy has to make an educated guess at how much stuff people will want, i could get into why this is ridiculous but thats another topic.


And what do the cappies think about this concept?

it doesn't happen this way in the real world market.

[BobKKKindle$]

it means that the workers can never recieve as much as they put in

If workers were renumerated with the means to access goods and services equivalent in value to the value that they imbue in a commodity through their labour, then no surplus value would exist and thus the Capitalist would be unable to make a profit on his investement. This is not connected with overproduction as such, it is simply a characteristic of the Capitalist mode of production. There will have to be a degree of 'self-exploitation' under Socialism as well in order to repair the depreciation of fixed Capital.

In answer to your question, in the event that the domestic market does not purchase all the commodity units that have been produced, the Capitalist exports them abroad. Thus the growing demands for the reduction and elimination of all barriers to the movement of commodities from the IMF and WTO. And eventually, military conflict between rival national Capitals for control of markets. According to an idea in neo-classical economics though, Say's Law, if market forces are left to function freely, markets will clear through the interaction of demand and supply. This relies on the assumption that the producer has perfect knowledge of demand - not just in the present, but all in the future - and so naturally this idea is rather silly. Maybe an OI Cappie can defend it?

[ZX3]

Originally posted by [email protected] 25, 2007 04:10 am
According to an idea in neo-classical economics though, Say's Law, if market forces are left to function freely, markets will clear through the interaction of demand and supply. This relies on the assumption that the producer has perfect knowledge of demand - not just in the present, but all in the future - and so naturally this idea is rather silly. Maybe an OI Cappie can defend it?
Socialists rely upon such an assumption for their own calculations.

In cvapitalism, if the producer is incotrrect, he pays the costs. There is damage, but it is limited. In socilaism, the damamge is spread throughout the economy.

[bloody_capitalist_sham]

In capitalism, if the producer is incorrect, he pays the costs. There is damage, but it is limited.

actually he sacks half his workers and/or gets bailed out big time by the Government.

[colonelguppy]

Originally posted by [email protected] 25, 2007 06:45 pm

In capitalism, if the producer is incorrect, he pays the costs. There is damage, but it is limited.

actually he sacks half his workers and/or gets bailed out big time by the Government.
government bailouts don't have much to do with a free market

[KC]

We don't have a "free market"...

[colonelguppy]

Originally posted by Zampanò@February 25, 2007 11:45 pm
We don't have a "free market"...
i know it sucks

[KC]

i know it sucks

But the idea of a free market doesn't work. The free market leads to capital accumulation which leads to monopolization which eliminates free/open competition on the market.

[colonelguppy]

Originally posted by Zampanò@February 26, 2007 12:16 pm

i know it sucks

But the idea of a free market doesn't work. The free market leads to capital accumulation which leads to monopolization which eliminates free/open competition on the market.
most monopolies are regional and never really last longer than a decade if they're lucky. unrestricted flow of cpaital allows competition to accumulate.

[wtfm8lol]

eh..nevermind

[KC]

most monopolies are regional and never really last longer than a decade if they're lucky.

This is false. Since we're talking about a laissez-faire economic system or a "free market" we have to look at the development of capitalism within the context of that system. The best example of this would be the industrial revolution and the years following it, when capital was allowed to circulate "most freely" and hence one of the "freeest markets" that we have seen. During that time period monopolization was completely open and obvious, with the various "barons" of the different industries. I'll cover the development of monopolization in the second part of this post.


unrestricted flow of cpaital allows competition to accumulate.

Competition doesn't "accumulate" although I realize you were just trying to be a smartass. However, in a sense I agree with you. In the beginning the unrestricted flow of capital does allow competition to be at its highest. However, over the development of time, these competitors grow unevenly. Some grow and grow while others are forced out of business or absorbed into the more powerful competitors. This is an undeniable fact. When this happens, you are left with very powerful competitors that coordinate massive amounts of capital and a large portion of the given market.

Anyone looking to start a business and compete is going to face much more difficulties and hardships in this time as compared to before, when everyone was "on a level playing field" (historically this has never happened, for two reasons: first, that capitalism developed unevenly across the globe; and second, that these businesses developed unevenly within the initial developments of capitalism). Anyone attempting to compete with these large businesses will have trouble because of a few crucial reasons.

The productive forces of these larger businesses is incredibly high, meaning that they can make each product for less and thereby undersell the new competitor. The only way that our newcomer can compete is to match this price, either by initially purchasing a factory matching the productive forces of their large competitor, or by catering to a "niche market," which doesn't concern us and is therefore irrelevent. Of course, this would mean that the startup costs of this business would be incredibly high, meaning that there's a lower chance that someone would actually enter to compete.

Also, even if they could match the productive forces in their factory with a given factory of their large competitors, their competitor still has enormous advantages. For example, the large business is much more able to lower its prices and undersell our new guy until they force him out of business because of the enormous amount of capital that they control. Since our larger business has control of not only one factory, but many they are obviously selling a much higher volume of commodities than our new guy. Because of this, they can lower the prices on their commodities and will hardly suffer. The new guy, on the other hand, will have tremendous difficulty in turning a profit because of this. The large business can then either choose to run him out of business or buy him out.

As capitalism develops, we can see that these large businesses get larger as their smaller competitors are "snubbed out" or absorbed. We can then see that as capitalism develops these businesses accumulate ever more capital and therefore it becomes ever more difficult to compete with these companies. The increasing cost of entering into business to compete, along with the increasing chance of failure due to the increasing ability of our larger business to undersell our newcomer, all contributes to a decline in competition and eventually develops into monopolization.

So while you were somewhat right that a free market encourages competition, this is only true initially and it is only completely true if everyone starts on a level playing field. With the development of capitalism comes the accumulation of capital into fewer and fewer hands, which hinders competition and leads to monopolization. The free market eventually negates itself. This is a necessary development of laissez-faire capitalism and because of this it is impossible to maintain. Eventually it's either going to lead to revolution or to government intervention.

[JimSachsen]

And eventually, military conflict between rival national Capitals for control of markets.

That why the US and Canada were always going to war while the fraternal socialists in the USSR and China were always at peace? :rolleyes: Let's ask a Tibetan.


Because of this, they can lower the prices on their commodities and will hardly suffer. The new guy, on the other hand, will have tremendous difficulty in turning a profit because of this. The large business can then either choose to run him out of business or buy him out.

I'm glad that neither Bill Gates nor Michael Dell bought into this line of thinking.

Michael Dell started out assembling and selling computers out of his dorm room at the University of Texas in the early 1980s. Started his company with $1000 capital, and went on to kick IBM's ass.


During that time period monopolization was completely open and obvious, with the various "barons" of the different industries.

The true robber barons were those who used political means to enrich themselves and their political cohorts through government subsidies, protective tariffs and government-enforced cartels.

Contrast the government-subsidized railroad robber barons of the 19th Century with the owners and managers of a free market railroad such as the Great Northern RR. World of difference. Leland Stanford, a former governor and US senator from California, used his political connections to have the state pass laws prohibiting competition for his Central Pacific railroad, and he and his business partners profited from this monopoly scheme. James J. Hill, by contrast, built the Great Northern Railroad without any government aid, even the right of way, through hundreds of miles of public lands, being paid for in cash.


As capitalism develops, we can see that these large businesses get larger as their smaller competitors are "snubbed out" or absorbed. We can then see that as capitalism develops these businesses accumulate ever more capital and therefore it becomes ever more difficult to compete with these companies.

Remember when no one thought that some up-start Japanese auto makers could possibly compete with GM, Ford, Chrysler, and American Motors?

Suggested reading: _How Capitalism Saved America_ by Thomas DiLorenzo.