"Crises" of overproduction

[JimmyJazz]

I get the concept of overproduction. The MI-C (war products being produced for profit and wars started to blow them all up), planned obsolescence, and so on. The evidence for it is abundant, and furthermore, it's just common sense that this is what would take place in a system driven by profit rather than a sober assessment of human need.

However, can someone please explain to me how overproduction is thought to produce "crises"?

And maybe provide some historical examples of such "crises" of overproduction?

[piet11111]

overproduction is occuring in wine and milk in the european union.
this is pushing the prices below profitability and the european union is forced to buy and destroy large quantity's of milk and wine otherwise a lot of farmers would go bankrupt.

the crisis is when the majority of farmers are gone and those left are capable to set their own prices.

[gilhyle]

Too many goods, price falls, return on capital falls, assets loose value and credit is not serviced

[KC]

overproduction is occuring in wine and milk in the european union.

This is also happening in the United States. As a means of counteracting this, congress both pays farmers to limit their production of milk as well as buying off large quantities of powdered milk and other dairy products and storing it in a cave in Kansas.

Basically overproduction leads to the lowering of prices, which leads to competitors going out of business which leads to the further monopolization of capital. However, putting a check on overproduction, as the US congress has done, leads to the destruction of goods that could have been consumed, the artificial rise in prices, a rise in profits, underproduction crises and a vast array of other problems. This (http://www.washingtonpost.com/wp-dyn/content/article/2006/07/18/AR2006071801467.html?nav=rss_print/asection) is a very good article on the consequences of the measures congress has taken to counter overproduction.


this is pushing the prices below profitability and the european union is forced to buy and destroy large quantity's of milk and wine otherwise a lot of farmers would go bankrupt.

The US is also exporting large quantities of powdered milk to Europe, which is causing further overproduction problems there.

The milk industry is definitely one of the most visible cases of overproduction and attempts by capitalists to "control" it.

[JimmyJazz]

So does anyone have a link/source for this milk business? Google didn't turn up anything really good.

[BIG BROTHER]

Besides the milk case, also in the U.S. there's an overproduction of wheat and corn, which isn't causing crisis in here(not that there isn't any) but since farmers here are overproducing, they're now selling their crops to Mexico, which causes crisis, since Mexican farmer aren't able to compete with them.

Also during the Era of the great depresion there was overproduction of wheat, in fact later on the goverment had to pay farmers so they wouldn't plant all their land.

[mikelepore]

The working class as a whole isn't paid sufficient wages to buy back its own products. Employers press the workers to produce more goods, which must be sold or else the companies can't recover their expenses, at the same time that the pay of the working class 99% of the population moves in the direction of being able to buy fewer of those goods. Companies respond with layoffs, and this further reduces the buying power of the working class, so the action they expected to fix their problem magnifies the problem instead. This must happen periodically as long as capitalism exists. There is increases pressure to conquer foreign markets and trade routes -- "export or expire" says a business proverb -- markets that the businesses of several countries also want simultaneously, often for the same reason, which often leads to war. The war doesn't fix the economic problem for long, if at all, because the other countries have the same feature, that workers are never paid enough in wages to buy back their own products. The war itself often provides a slight economic stimulus because it's a way to destroy goods, reducing the inventory that "must be sold" but "can't be sold"; however, government taxing businesses so that government can buy their goods and then destroy those goods is not a strategy that could help in the long run. It causes capitalism to have a never-ending war-depression-war-depression cycle.

[KC]

The working class as a whole isn't paid sufficient wages to buy back its own products. Employers press the workers to produce more goods, which must be sold or else the companies can't recover their expenses, at the same time that the pay of the working class 99% of the population moves in the direction of being able to buy fewer of those goods.

Putting it in terms of the purchasing power of the working class is flawed for the very reason that the working class produces all products for society as a whole, not just for the working class.

[gilhyle]

I would tend to see that as a crisis of underconsumption 9though the two are really the same thing under a different aspect, just depends on the mechanism of realisation

[Raúl Duke]

I heard something about grain being burned in Africa to keep wheat prices high...

A question: is there a link between overproduction and the "tendency for profits to fall over time" ( something that comes out in Capital I think...)

[gilhyle]

I heard something about grain being burned in Africa to keep wheat prices high...

A question: is there a link between overproduction and the "tendency for profits to fall over time" ( something that comes out in Capital I think...)

On one view, crises of overproduction are ultimately forms of realisation of the tendency of the rate of profit to fall, but that view tends to see the TRPF as having a causal role in all such crises. That generalisation is a problem. The TRPF is better conceived as a secular tendency which has an increasing role in the events of capitalism - in that view one cannot generalise about the relationship between the two.

[Red Economist]

one point that is often maid is that there could well be a crisis of UNDER PRODUCTION.

over production assumes that you produce too much- and therefore price fall, wages fall, unemployment risies.

under production assumes you produce too little- and therefore prices go up in raw material industries, wages fall (since in the manufaturing and service industries the capitalist can't sustain them and keep the profit), and unemployment rises.

over production is what happened in the great depression, (1929-1933) where as under production is what is happening with Oil today and with OPEC in the 1970's.

under production is caused by resource depeletion (oil supplies are supposed to go down after 2012- so watch out) and the use of market power to contract supply and increase profits- so if Microsoft controlled 90% of the software market- they could force prices up and deliberaltey under produce inorder to increase profits.

I've never seen it is any text books- but it makes some sense in general terms.