In this brief
intervention I wish to discuss cursorily, without source or data references,
the most popular and frequent type of theories advanced by orthodox and even
radical economists about capitalist economic crises. These tend to be cognate
or contiguous in the sense that the one, the overproduction theory, is really
the obverse of the other, the underconsumptionist. Typically, these theories
regard capitalist production as a simple production of “goods”: in other words,
the capitalist economy is simply a historical variant of many other preceding
forms of production in that it differs merely in the way in which the social
product is “distributed”. The underlying assumption is that expounded in the
1930s (before Keynes) by Michal Kalecki: capitalism is a system of production
divided into capitalists and workers. The workers spend what they earn and the
capitalists earn what they spend. In other words, the difference between the
“classes” of capitalists, on one side, and workers on the other has nothing to
do with social antagonism – with the political control over what is produced,
when and how and to whom it is distributed – but rather it has to do entirely
with the “distribution” of what is taken to be a “technologically-determined”
process of production where technology and labour processes are entirely
“external” to the capitalist system of production!
Now, we know very
well that this is quite simply false. But for these so-called “radical”
economists (from Kalecki to Minsky to Krugman even) what matters is not “what
is produced and how”, but rather how the “product” (understood, once again, to
be a “technically-given” output of production) is distributed between the
social classes. It stands to reason, therefore, that for these theoreticians
the entire problem of capitalist economies – all the crises, recessions and
depressions – have nothing to do with the antagonism of the wage relation –
with the command of dead labour over living labour – but have all to do with
how the product of labour and technology is distributed.
If capitalists
“earn” too much because wages fall too low, they will be unwilling to consume
the surplus earned and therefore aggregate demand will be too low to employ all
workers, resulting in higher unemployment. This is called “underconsumption”.
But at the same time it is also “overproduction” because workers’ wages are
insufficient to consume the whole “product”. In
the alternative case, if capitalists reinvest their “excess earnings” there
will be “overproduction” as a result of excessive “competition” between
capitalists which workers will not be able to consume because their wages will
be too low to absorb the (excess) production at a given “required” rate of profit. The resulting lower
rate of profit will further remove capitalist incentives to invest unless a
political entity like the State intervenes to provide the requisite aggregate
demand, with a return to “equilibrium” between investment and savings and
employment.
Alternatively, if
workers are paid “too much” in wages due to excessive demand for “labour” or
because of State labour policies, the resulting fall in the rate of profit will
again cause a decline in the rate of investment with a consequent rise in
unemployment. If the capitalists “save” or retain their excess profits, there
will be “underconsumption” or deficient aggregate demand which will again
result in a crisis that will require State intervention to restore
“equilibrium” conditions.
In both these
situations, it is the politically-determined or “acceptable” rate of profit and
wage rates that will determine whether the capitalist economy is at equilibrium
or not, and therefore whether or not there is a “crisis”. It can be seen quite
readily from this very simple presentation that these widely-held opinions or
“theories” of what constitutes a capitalist economy leave out the most crucial
and essential element of capitalism: the social antagonism of the wage
relation, of the fact that workers are not “free” to decide democratically what
is produced and when and how, and then in turn what is to be done with the “pro-duct”!
We can see that
in both instances the “radical” theories of capitalism presented here can
oppose only a “moralistic” objection to capitalist production in terms of the
“distribution” of what is uncritically and unquestioningly accepted to be “the
process of production” – as if this were a “technically-given”, “scientific”
process wholly devoid of political antagonism! That is why bourgeois economists
are able to present “economics” as a “science” that deals merely with
“quantities” or with “optimal distribution” of the “output” of production given
basic “political” assumptions, choices and constraints that are “external” to
economic “science” itself! Once again, we know that this is entirely false and
grievously and perfidiously misrepresents and mystifies the operation of this
most odious social system – the society of capital.
Theories of
over-production and under-consumption have this in common then: - that both
postulate the existence of a “neutral process of production” over which the
only antagonism possible is over the “distribution” of the “product” understood
as homogeneous “output” either (in the Marxist version) of “socially necessary
labour time” or (in the neoclassical version) of the marginal utility of the
totality of “endowments” available for exchange on the “free self-regulating
market” through the “price mechanism”. We have already considered the “apories”
(or practical contra-dictions) involved in these notions and will not reiterate
them here.
The important
point to understand is that “over-production” and “under-consumption” theories
both postulate an “equilibrium level” of profits and wages that (in the
neoclassical version) is determined by the original marginal utility of the
“endowments” of individual market participants and (in the “Marxist” version –
which is partly a distortion of Marx’s position) by the politically-determined
“share” of wages and profits over the distribution of the “output”.
One thing to
notice immediately here is that this theory does not explain why, given that
“output” is a homogeneous set of “pro-ducts” produced with “neutral and
exogenously given” technologies, there should be a “class division” between
workers and capitalists. Put otherwise, if all that is wrong with capitalism is
that capitalists may re-invest too much (overproduction) or that workers may
consume too little (underconsumption) –why, then the answer is all too easy!
Simply ensure that capitalists and workers work out (mathematically!) the
“equilibrium” level of wages to profits so that the economy may operate at
maximum efficiency with full employment of resources! The whole of economics
would then boil down to a simple “engineering problem”! Because obviously it
could never be the case that workers would consume too little unless their
wages were too low, or that capitalists would produce too much unless their
profits were too high! In other words, in such an economy there would be no
distinction, aside from a “technical” one perhaps (the capitalists would be
simple engineers or managers “conducting” the production process), between
workers and capitalists! Everyone could then aspire to become – as in the
company capitalism utopia – a “shareholder” with a share in the economy
commensurate with some “labour input” or politically-agreed level of income!
This is precisely
the kind of nonsense that comes out of people like Kalecki and Keynes or Minsky
and Krugman! All of these “theoreticians” deny that capitalist problems and
crises have to do with the antagonism of the wage relation because…. that would
amount to placing the blame on workers! (See Krugman link below. Minsky says as
much in “Can ‘It’ Happen Again?”) As if, that is, workers should be blamed for
an antagonistic relationship in which they are necessarily the “exploited”
party that is forced and coerced “to sell” its “living activity” or living
labour… in exchange for dead labour in the form of “goods and services” from
the capitalist!
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