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From International Socialism (1st series), No.95, February 1977, p.27.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
Underconsumption Theories: A Historical and Critical Analysis
Michael Bleaney
Lawrence and Wishart £3
Underconsumption is defined by the author as the theory that the economic problems of capitalism are caused by a lack of demand for consumption goods. So. on this argument, crises happen because workers are paid too little. If wages were higher, then there would be a market for goods that would otherwise go unsold or even not be produced at all.
This theory is very common on the left today, especially in the Communist Party and among Tribunites. As the author points out, underconsumption lends itself to reformism because it implies that the crisis can be solved, not by the revolutionary overthrow of the system by the working-class, but by wage increases that will lead to economic recovery.
Marx rejected underconsumption because he grasped that capitalism is based, not on production for consumption, but on production for production. Geared to the pursuit of profit, individual capitalists invest the surplus value squeezed out of their workers in further production. Their investment decisions create a demand, not for goods for the final consumer, but for plant and equipment for other capitalist producers. The market for these goods depends on the overall rate of accumulation of capital, not consumer demand, and indeed it can stimulate the latter, since the expansion of the investment goods sector may mean more jobs, and so more buyers for wage goods.
Until the final chapter this book is a valuable addition to the history of economic theory, showing how over the years underconsumption has recurred on the fringe of orthodox economics in times of crisis, as a solution that does not involve the destruction of capitalism. However, Bleaney concludes by turning his attention to the long post-war boom. He tries to reduce explanations of this boom based on massive arms production to versions of underconsumption, even though he has to admit that
‘Michael Kidron, for instance, in his book Western Capitalism Since The War, presents quite a different theory.’
Bleaney’s own explanation of the boom differs little from Keynesian orthodoxy:
‘The knowledge that the State would intervene to stimulate demand should the growth rate flag had encouraged capitalists to invest on the assumption of the maintenance of that growth rate.’
But capitalists invest only when they expect a profit. Marx believed that there was a long-run tendency for the rate of profit to fall rooted in the very nature of capital. He argued that the pressures of competition would lead capitalists to increase their investments in plant and equipment faster than they took on workers producing surplus-value and so cause the rate of profit to fall. Today Western capitalism is laced with a severe crisis of profitability. The problem for Marxists is to explain why this crisis has taken place now and why it did not take place for 20 years after the Second World War. Bleaney has nothing to contribute to the solution of this problem.
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