Crisis Theories: Underconsumption

The most popular explanations for economic crises advanced by Marxists since the death of Engels in 1895 are underconsumption, profit squeeze and disproportionality. The theory of underconsumption explains crises by the inability of the working class to “buy back” the full product it produces.

Profit squeeze theories can be be divided into two sub-theories. One version puts the blame for crises on a decline in the rate of surplus value caused by the fall in unemployment that occurs during a boom. The other sub-theory, in contrast, sees the rise in the organic composition of capital causing a fall in the rate of profit. The fall in the rate of profit leads to the crisis.

The theory of disproportionality can also be divided into two sub-theories. One puts the emphasis on the anarchy of production. For example, raw materials might be produced in insufficient amounts as industrial production expands leading to an economic crisis. The other sub-theory puts the emphasis on the relationship between the two great departments of production, the one that produces means of production (called Department I by Marx) and the one that produces consumer goods (called Department II by Marx). It is asserted that either Department I produces too much relative to Department II or Department II produces too much relative to Department I and that this leads to a general economic crisis.

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One Response to “Crisis Theories: Underconsumption”

  1. What’s Happening? » Blog Archive » Walker’S World: Depression Looms | Your Film Project Says:

    […] Crisis Theories: Underconsumption « Critique of Crisis Theory […]

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