Schematically, the Marxist tradition separated into two large tendencies: on the one side, underconsumptionist theories linked or not to theories of disequilibrium between departments of capitalist production in the reproduction of capital; on the other, theories of the value-functioning of capital founded on the overaccumulation of capital vis-à-vis its valorisation, that is to say on the tendency of the rate of profit to fall. On the one side, all the social democratic orthodoxy or dissidence from Bernstein to Rosa Luxemburg passing through Kautsky and Hilferding1, on the other, a minority of theoretical snipers like Grossman and Paul Mattick2. If this crisis obliges us to return to these theories, it is because we are confronted by two obvious facts which seem to contradict each other: on the one hand the only coherent Marxist theory of crises is the one developed by Paul Mattick3, i.e. the one based on the tendency of the rate of profit to fall; on the other hand this crisis is a crisis of underconsumption (it is rather than ‘appears as’ such). Our principal theoretical confrontation, as productive confrontation, can only engage with the theses of overaccumulation of capital vis-à-vis its capacity to valorise itself, i.e. with Mattick and his two main works on the question: Marx and Keynes: The Limits of the Mixed Economy (1969) and Economic Crisis and Crisis Theory (1974).
Mattick affirms the fundamental Marxian thesis on crises but in a one-sided way: ‘From a Marxian point of view, the various existing theories of crises which categorize the problem as either underconsumption or the overproduction of commodities – the one implying the other and both involving the realization problem – only describe the externals of the capitalist crisis mechanism. The periodic overproduction of the means of production and of commodities prevents the realization of surplus-value is, in Marx’s view, only an overproduction of means of production that cannot serve as capital, that is, cannot serve for the exploitation of labor at a given degree of exploitation. And though the overproduction of commodities is an obvious fact, Marx’s theory is not a theory of underconsumption. According to Marx, capitalist production is, and must always be, at variance with the consuming power it brings forth – in periods of prosperity as well as in periods of depression. It is not a “consuming power” growing in proportion to production which explains the increasing social demand for consumption goods in the upswing period of capital development; it is merely the greater number of workers now employed.’4
It is true that Mattick is reprising here a paragraph of the chapter on The Internal Contradictions of the Law of the Tendency of the Rate of Profit to Fall: ‘Over-production of capital is never anything more than overproduction of means of production – of means of labour and necessities of life – which may serve as capital, i.e., may serve to exploit labour at a given degree of exploitation; a fall in the intensity of exploitation below a certain point, however, calls forth disturbances, and stoppages in the capitalist production process, crises, and destruction of capital.’5
We should note that in this reprise Mattick totally neglects the phenomenon of ‘relative immiseration’ inherent to phases of expansion.6
However: ‘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.’7
From the moment when, with the real subsumption of labour under capital, underconsumptionism no longer had any other horizon than the management under different forms of the capitalist mode of production, a revolutionary theory of crises had to be anti-underconsumptionist. Mattick never historicises his point of view, he is content to say that it is the correct Marxian point of view on crises, and that all others are in error. But the ‘return’ to the falling rate of profit is carried out in the critique and the polemic against underconsumptionism and it remains indelibly marked by it in Mattick’s theory. To return in these conditions to the theory of the tendency of the rate of profit to fall was to develop it in a one-sided way. Mattick thus enclosed himself in an opposition created by himself (in particular historical and ideological conditions). The theory of the tendency of the rate of profit to fall imposed itself as the only one able to account for the historical character of the capitalist mode of production and of its obsolescence in a situation where exchange with the outside of the system had become marginal and the reproduction of labour-power was integrated into the reproduction of capital.
The choice of this theory didn’t come about by default, it is the only one to resituate the exploitation of the working class at the heart of the contradiction of the system as dynamic and limit of the system itself. The proletariat is understood as a revolutionary class not because it is the suffering class and the best-placed executor of a sentence that the system pronounces against itself, but because it is its own existence and its own role in the system which is at stake in this contradiction which manifests itself in crises. Mattick didn’t go as far as de-objectifying the contradiction which is the tendency of the rate of profit to fall, but everything was in place for it to be done.
The problem that we have with Mattick is that he remains locked in within this dichotomy, within this antithetical partition in the theory of crises between the tendency of the rate of profit to fall and workers’ underconsumption (the question of realisation). ‘The tendency [of the rate of profit to fall] …must at all times appear in the actual events of the market, albeit in modified form’8: for Mattick, the question of realisation is always relegated to the manifest realm of appearance vis-à-vis a true essential reality which is the tendency of the rate of profit to fall.
‘The real barrier of capitalist production is capital itself. It is that capital and its self-expansion appear as the starting and the closing point, the motive and the purpose of production; that production is only production for capital and not vice versa, the means of production are not mere means for a constant expansion of the living process of the society of producers. The limits within which the preservation and self-expansion of the value of capital resting on the expropriation and pauperisation of the great mass of producers can alone move – these limits come continually into conflict with the methods of production employed by capital for its purposes, which drive towards unlimited extension of production, towards production as an end in itself, towards unconditional development of the social productivity of labour. The means – unconditional development of the productive forces of society – comes continually into conflict with the limited purpose, the self-expansion of the existing capital. The capitalist mode of production is, for this reason, a historical means of developing the material forces of production and creating an appropriate world-market and is, at the same time, a continual conflict between this its historical task and its own corresponding relations of social production.’9
Marx doesn’t establish here a contradiction between capitalist production and ‘the real social needs’ of society (as Mattick maintains in Economic Crisis and Crisis Theory10 ), he merely establishes that the capitalist mode of production is a transitory one. ‘Real social needs’ are not one term of the contradiction; on the contrary, just for the purposes of clarification as to what is being spoken about here and what is not. The contradiction presented here is internal to the capitalist mode of production: the limits within which the preservation and the increase in value have explicitly as their foundation ‘the expropriation and immiseration of the great mass of producers’, and these limits enter into conflict with the ‘unlimited extension of production’.
The relations of distribution and consumption which Marx presents as the other term of the contradiction are explicitly the specific antagonistic relations of capitalist society:
The conditions of direct exploitation, and those of realising it, are not identical. They diverge not only in place and time, but also logically. The first are only limited by the productive power of society, the latter by the proportional relation of the various branches of production and the consumer power of society. But this last-named is not determined either by the absolute productive power, or by the absolute consumer power, but by the consumer power based on antagonistic conditions of distribution, which reduce the consumption of the bulk of society to a minimum varying within more or less narrow limits. It is furthermore restricted by the tendency to accumulate, the drive to expand capital and produce surplus-value on an extended scale. (…) But the more productiveness develops, the more it finds itself at variance with the narrow basis on which the conditions of consumption rest.11
These few lines are essential because here overaccumulation and underconsumption are more than related, they are identified as one single contradictory process. The theory of underconsumption is false if one is content to say that the crisis has as its origin the underconsumption of the masses – i.e. if one doesn’t justify the latter by the tendency of accumulation, i.e. if one maintains the terms of the contradiction in an external relation the one to the other; in fact the tendency to the unlimited character of production and the underconsumption of the masses are each reciprocally the raison d’être of the other: production comes up against the narrow limits of the relations of consumption which are themselves limited by the very characteristics in which the tendency of accumulation is developed. The theory of underconsumption is false and does not permit one to pass to a single theory identifying underconsumption and overaccumulation (the theory of the tendency of the rate of profit to fall); the theory of overaccumulation is correct, on the condition that it is developed outside the dichotomy of the two theories, and it allows the passage to a single theory.
The development of the social productiveness of labour is manifested in two ways: first, in the magnitude of the already produced productive forces, the value and mass of the conditions of production under which new production is carried on, and in the absolute magnitude of the already accumulated productive capital; secondly, in the relative smallness of the portion of total capital laid out in wages, i.e. , in the relatively small quantity of living labour required for the reproduction and self-expansion of a given capital, for mass production. This also implies concentration of capital.12
If we follow attentively the course of development of the social productivity of labour, we notice that the tendency of the rate of profit to fall inherent in this development is identical to the relative decrease of the part paid out as wages, whereas the mass of production and of the surplus-value that it contains increases in proportion with the development of this social productive power. It follows that the tendency of the rate of profit to fall is equally a problem of realisation.
Too many means of labour and necessities of life are produced at times to permit of their serving as means for the exploitation of labourers at a certain rate of profit. Too many commodities are produced to permit of a realisation and conversion into new capital of the value and surplus-value contained in them under the conditions of distribution and consumption peculiar to capitalist production, i.e., too many to permit of the consummation of this process without constantly recurring explosions.13
As a general rule the theory of overaccumulation is satisfied to limit itself to the first sentence, to the first part of this quote, forgetting the rest, which is, it is true, only a repetition of the first formulation, a repetition which Marx carries out because his aim is to show, against the economists, who accept an overproduction of capital, that a general overproduction of commodities is not only possible in the capitalist mode of production, but further that it is the very same thing as this overproduction of capital. We are not dealing here with a formulation, which, as Mattick suggests with embarrassment, ‘represents either an error of judgement or unclear writing’.14
The growth in the mass of the profit which permits accumulation, and therefore the absolute increase in the number of wage workers despite its relative fall, will continue to make the rate of profit fall. Indeed, it is only exceptionally that accumulation does not affect the relation between constant and variable capital. Accumulation aims at an increase in productivity, and, for a new method of production to increase productivity, it must transfer to the commodity, taken by itself, an additional portion of value for the wear and tear of fixed capital smaller than the portion of value saved by the reduction in living labour.15 Thus, contrary to appearances, the accumulation made possible by the growth in the mass of profit despite the fall in its rate, even if it multiplies the simultaneous labour days, does not increase workers’ consumption in relation to the total production; indeed this is the case as the rate of profit continues to fall. In the process of accumulation, the fall in the rate of profit is always identical to the restriction of workers’ consumption. The overaccumulation of capital, that is to say the shortage of surplus-value, in the very mechanism that leads to it, is not only identical, but also has its raison d’être in the necessity of workers’ underconsumption in relation to the increased mass of production. A scarcity of surplus-value on one side simply means a plethora on the other. The scarcity of surplus-value in terms of its accumulation is its plethora in terms of its realisation; there is no primacy, no causal relation between the two: the fall in the rate of profit is the reduction of necessary labour in relation to the increasing mass of capital which is itself necessary to counteract the fall in the rate of profit by increasing its mass.
Too many commodities are produced to permit of a realisation and conversion into new capital of the value and surplus-value contained in them under the conditions of distribution and consumption peculiar to capitalist production…16
Marx is in no way speaking of an ’absolute power of consumption’ here, but rather of the ’power of consumption within a given framework of antagonistic conditions of distribution’17.
When Mattick explains that one can neither draw from such remarks a crisis theory having an underconsumptionist basis nor make of the realisation of surplus-value the main problem of the capitalist mode of production, he is absolutely right, but only if we accept the separation between the two theses (overaccumulation and overproduction). Within the framework of this separation, Mattick is totally right against the underconsumptionists, but it is the separation that is wrong.
Over-production is specifically conditioned by the general law of the production of capital: to produce to the limit set by the productive forces, that is to say, to exploit the maximum amount of labour with the given amount of capital, without any consideration for the actual limits of the market or the needs backed by the ability to pay; and this is carried out through continuous expansion of reproduction and accumulation, and therefore constant reconversion of revenue into capital, while on the other hand, the mass of the producers remain tied to the average level of needs, and must remain tied to it according to the nature of capitalist production.18
Marx might seem to take a purely ‘underconsumptionist’ point of view here, but what is referred to is the overproduction of capital through the ‘constant conversion of revenue into capital’ and the rise in the constant part of capital (this specification, because it is not explicitly formulated, makes Marx’s argumentation appear as purely ‘underconsumptionist’) in this conversion because ’the mass of producers must necessarily remain limited to an average level of needs because of the nature of capitalist production’. The overproduction of capital is an overproduction of commodities, in relation to the necessary restriction of workers’ consumption that is necessary to increase the accumulated wealth. This restriction is the basis of the overproduction of capital, so long as this restriction is also seen as the continuous growth of constant capital in the ‘reconversion of revenue into capital’.
It is enough to introduce the parameter c (constant capital) to unify the theory of crises, i.e. to have a single theory of the crisis at the level of individual capitalists and of all the agents of the production and the circulation, and the crisis at the level of the general laws of accumulation of global capital. The contradiction between ‘production for production’s sake’ and ‘the limited relations of distribution and of consumption’ does not simply derive from the fact that ‘too much revenue was transformed into capital’ (that would be a purely underconsumptionist thesis) but from the fact that, in this transformation, the part corresponding to c constantly grows.
What is crucial is that it is possible to explain the identity starting from overaccumulation, but that it is also possible to do it starting from workers’ underconsumption. The aim of capitalist production is, with a given mass of wealth, to make the surplus-product or the surplus-value as great as possible. This aim is reached thanks to an increase in constant capital which is relatively faster than the growth in variable capital, or through the setting in motion of the greatest constant capital possible with the smallest variable capital possible. The same cause (the search for the greatest surplus value possible) produces an increase in the mass of profit and a fall in its rate through the reduction of the funds from which workers take their income. In the reproduction of capital, this reduction becomes the cause preventing the conversion of commodities into new means of increasing the exploitation of labour. In this sense, the relation between overproduction and overaccumulation becomes the following: it is because the fund of workers consumption is constantly reduced in relation to the mass of production, thus starting from underconsumption, that we arrive at the overproduction of capital, that is to say the impossibility of renewing the exploitation of labour in an efficient way. We are not referring here to the possibility of an inversion in the direction of causality in the interplay between overproduction and overaccumulation, because there is no causal relation between the two terms: they are the same phenomenon under two different aspects; through each one we are brought face to face with the other.
In the same chapter of Capital dedicated to ‘the law’s internal contradictions’ (a fundamental chapter as far as crisis theory is concerned), Marx writes: ‘The more productivity develops, the more it comes into conflict with the narrow basis on which the relations of consumption rest,’19
and a little bit further: ‘Periodically, however, too much is produced in the way of means of labour and means of subsistence, too much to function as means of exploiting the workers at a given rate of profit.’20
What follows this last quote is then explicit:
Too many commodities are produced for the value contained in them, and the surplus-value included in this value, to be realised under the conditions of distribution given by capitalist production, and to be transformed back into new capital, i.e. it is impossible to accomplish this process without ever-recurrent explosions21
If we can produce a unified crisis theory at the level of the static (even if the latter is always a process), we need to put it to the test of the dynamic, i.e. the phases of expansion, reversal and crises, and of ‘ways out of the crisis’. In the dualistic and confrontational framework in which Mattick functions when he exposes the ‘true’ crisis theory, one of his strong arguments, which he uses several times in Marx and Keynes as well as in Economic Crisis and Crisis Theory, consists in saying that the disproportionality between production and consumption is not only functional during the ‘normal’ course of capitalist accumulation, but also that the ‘way out of the crisis’ is a sharpening of this disproportionality.
In the expansion phase, the fact that the disproportionality is functional means only, as we showed, that the rise in the organic composition of capital is just as much functional. Underconsumption and overproduction of capital are the same contradiction which is immanent to accumulation and which breaks out in crises.
The moment when the cycle of expansion turns into a crisis can first be understood in the relation between rate and mass of profit. If we look at this process in which the fall in the rate is compensated by the increase in capital, one condition for it to succeed is that the mass of total capital must increase faster than the rate of profit falls. Furthermore, not only must the increase in the mass of capital be faster than the fall in the rate of profit, this is not enough. Within a rising organic composition, in order to use as much variable capital, or even better, more variable capital, the constant part of capital must proportionally increase more than the total capital necessary to compensate the fall in the rate of profit by its mass. Therefore, a larger and larger fraction of revenue is transformed into constant capital.
Thus the process of compensating the fall in the rate by increasing the mass of capital, which explains simultaneously the possibility of prosperity and the necessity of it giving way to crisis, is, once more, absolutely identical to the growing disproportionality between production and consumption through which the process can continue, and to this very disproportionality between production and consumption that breaks out in the crisis. The immanent contradiction which had been developing in prosperity breaks out in the crisis. The absolute fall in the profitability of capital breaks out in the crisis: too much revenue has been transformed into capital, and, to be more precise, into constant capital; overaccumulation is overproduction, overproduction is overaccumulation.
Sometimes, Mattick comes close to this unification of the crisis theories:
The general competition thus leads to a more rapid growth of the constant versus the variable capital […]. It is this very process that makes possible the realization of surplus value by way of accumulation, without respect for the restriction of consumption this presupposes. Surplus value becomes new capital, which in its turn produces capital. This process, senseless as it is, is actually the consequence of a mode of production oriented exclusively toward the production of surplus value. All good things come to an end, however, and this same process finds its nemesis in the tendency of the rate of profit to fall. At a certain point the realization of surplus value by accumulation is halted, when accumulation ceases to yield the surplus value necessary for the continuation of the process. Then it suddenly becomes apparent that without accumulation a part of the surplus value can not be realized, since demand is insufficient to transform the surplus value lying hidden in the commodities into profit.22
But two pages later, Mattick puts forward the following hypothesis:
If the amount of surplus value created in production was great enough to hasten accumulation even more, the increased consumption would be no hindrance to further accumulation but could grow together with it.23
It should be said that this hypothesis is not coherent because of “the restriction of consumption this (accumulation) presupposes”. Mattick comes often very close to a unification of the crisis theories, but the fundamental dualism in which he functions always makes him retreat slightly when he thinks he has gone too far.
We must now examine the question of the ‘way out of the crisis’, because it contains one of Mattick’s main arguments in favour of the pre-eminence of overaccumulation over the overproduction of commodities, the latter seen as a secondary effect.
Against the underconsumptionist theory, Mattick insists on the fact that crises end not by a decrease but by an increase in production and that this increase is due to a heightened exploitation of labour. The realisation of surplus-value takes place through a new impetus given to accumulation and Mattick stresses that the curbing of the crisis takes place through an increased imbalance between the production and the realisation of surplus-value, between production and consumption: ‘(To overcome the crisis) more of the social labour must fall to capital, less to the workers.’24 This is for Mattick the definitive argument disqualifying underconsumptionist theories. In a non-unified crisis theory, this argument is peremptory.
It is the parameter c (constant capital) that should be examined because it is the one which unifies the crisis theories. The way out of the crisis implies that, in the crisis itself, two processes are taking place: first, an increase in exploitation, that is to say in the rate of surplus value (s/v), second, a devalorisation of constant capital, both fixed and circulating (raw materials, etc.), a phenomenon to which Mattick does not give the attention it deserves.25 What results is a restoration of the rate of profit “from both sides”: a rise in surplus value, fall in the value of constant capital and even of variable capital (the crisis has had an effect on the level of wages). The devalorisation of c has no lower limit, and it is possible to take over a company for a token one Euro or Dollar. As for the fall in v, it is limited by the bare survival of the workers. If c and vhave both been devalorised, the devalorisation of c is superior to the devalorisation of v. From this results not only a fall in c+v, but also a fall in the organic composition of capital, this being reinforced by a very important phenomenon in the way out of the crisis: a concentration of devalorised capital.
A large part of the nominal capital of the society, i.e., of the exchange-value of the existing capital, is once for all destroyed, although this very destruction, since it does not affect the use-value, may very much expedite the new reproduction.26
The capacity of capital to absorb a certain quantity of labour and therefore to valorise itself depends on its use value and not on its exchange value. The same capital can have been divided by ten in terms of its exchange value and still set in motion the same quantity of labour. During the crisis, the devalorisation of the two fractions of productive capital do not obey the same laws; the devalorisation of c always tends to be greater than the devalorisation of v.
We previously tried to show that it was the evolution of c (the rising organic composition) which identifies the tendency of the rate of profit to fall with workers’ underconsumption (and vice versa). The way out of the crisis comes through a rise in the rate of exploitation and not through the giving out of money to workers, but the organic composition of capital is modified in favour of v. Accumulation resumes, but the part of revenue that society transforms into constant capital has fallen. Indeed, the way out of the crisis does not come from a increase in workers’ purchasing power, as the underconsumptionists would have it (and this would imply an absurd situation in which workers were able to buy back a part of the surplus value that was extorted from them) but the rate of profit is restored by an increase in the surplus value and by a modification of the organic composition of capital which reduces the part of revenue transformed into constant capital. In this way the disproportionality between consumption and production has not been abolished, but the restoration of the rate of profit is identical to the growth, in relation to total production, of the part of revenue assigned to consumption.
We must now sum up this long discussion on crisis theory. The imbalance between the mass of production (in terms of value) to be realised and the consumptive power of society really is an imbalance to the extent that, if production cannot be realised, that is to say if it cannot function as additional capital (transformed into c and v) at the required rate of profit, the reason for this lies in workers’ underconsumption, i.e. in the relative and/or absolute reduction of v (variable capital) in relation to c (constant capital). The same phenomenon, which is the rise in the organic composition of capital, is on one side a fall in the rate of profit and on the other side a structurally necessary reduction of workers’ consumption. The latter, i.e. the capitalist relations of distribution, the law of the wage, is by definintion the law of the rising organic composition. Workers’ underconsumption (in relation to the value produced) and fall in the rate of profit are absolutely identical. Workers’ underconsumption means the necessity of increasing the part of production necessary for accumulation under the form of constant capital and the reduction of variable capital; that is to say that the very mechanism of capitalist accumulation is by definition a imbalance between the consumptive power of society and the growth in production. This means (to say it in another way) that the tendency of the rate of profit to fall is substantially identical to workers’ underconsumption in relation to the growth of production according to the laws of capital.
The question of realisation and the problems of circulation are not a consequence of the tendency of the rate of profit to fall; the halt in accumulation provoked by an increased mass to be valorised is only the growing imbalance between v and c in the division of production between the part that is consumed and the part intended for accumulation, an imbalance that reaches a limit-point. The growth in the part of production intended for accumulation, that is to say, the rise in c and the fall in v, is, on the one hand, the very process of the fall in the rate of profit and, on the other hand, it is this imbalance between the mass of the value produced and the consumptive power of society according to the laws of distribution of the capitalist mode of production that are only the reciprocal movement of c and v (to the extent that society can be said to consist only of productive workers and capitalists, which is not the case, fortunately for the surplus value eaters). This growing imbalance is itself absolutely identical to the rise in the organic composition. The crisis brought about by the tendency of the rate of profit to fall is by definition and by cause an underconsumptionist crisis which is itself given, i.e. it only exists, because it is the tendency of the rate of profit to fall. We are here beyond something that is and that manifests itself as (Mattick). What is considered at the level of realisation is nothing else than the rise in the organic composition which itself is nothing else than the result of the growing imbalance between v and c, an imbalance which has its roots in the necessary growth of surplus value which is in its very cause the reduction of v: the root of the tendency of the rate of profit to fall.
The scarcity of surplus value in relation to accumulation is its plethora in relation to its realisation: there is no primacy here. The fall in the rate of profit is the reduction of necessary labour in relation to the rising mass of capital and the multiplication of production to compensate for the fall in the rate by the mass. Not enough surplus value is produced: this means that this surplus value can not be realised. Indeed, the insufficient production of surplus value means that the conversion into c was too great, it also means (by definition and simultaneously), absolutely and relatively, that the necessary labour that regulates the consumption of the mass of the producers has fallen relatively and absolutely too low (there is no cause–effect relation between the two, the scarcity of surplus value is identical to its plethora).
The ultimate cause behind all real crises always remains the poverty of the masses and the restriction of their consumption, which is only the fall of the rate of profit when the growth in the rate of surplus value no longer compensates for this fall. The ultimate cause behind all real crises remains always the fall in the rate of profit which is only the poverty of the masses and the restriction of their consumption.
It is fundamental to produce the unity of crisis theories in order to define the current crisis. The current crisis is a crisis of the wage relation, both as the capacity of capital to valorise itself and as the capacity of the reproduction of the working class as such. It is a crisis of realisation, a crisis that exists as underconsumption (exists as rather than manifests itself as). There are three reasons for this: low productivity, a low level of investment, and the modalities of exploitation of labour power. This last point sums up the others because it is the synthesis of all the characteristics of restructured capitalism. Because it is restructured capitalism specifically that has gone into crisis. Whether one considers the transformations in the labour market, the modalities of the exploitation of labour power in the immediate labour process, the social and collective reproduction of this labour power, the financial globalisation of capital, the transformation of surplus value into additional capital, the contradictions and the limits currently exploding are the same ones which previously constituted the dynamic of the system and which defined the conditions of its development. To consider this crisis as the late outcome of the crisis of the beginning of the 70s ignores the restructuring of capital which took place, that is to say the change from one cycle of struggle to the next.