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Red Theory: Capitalist accumulation and overproduction

Analysis by J. Sykes |
August 28, 2022
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Red Theory: Capitalist accumulation and overproduction

It is a fact of historical materialism that the development of the productive forces reduces the amount of labor required by production. As technology and techniques improve, the amount of work required to meet human needs is reduced. This should be a fact that liberates humanity from toil, freeing us to pursue our interests, hobbies, goals of self-development, and so on.

But that’s not what has happened, and there is a material reason why that hasn’t happened. In fact, under capitalism, it cannot happen. The capitalist relations of production - the relations of class, division of labor and ownership - stand in the way of that. Because the means of production are concentrated in the hands of a small group who get rich at the expense of those who do the work, expropriating for themselves the wealth the workers produce, instead of liberating us, technical advancement under capitalism furthers inequality and sharpens class struggle.

These technical and technological improvements in industry and agriculture mean that the number of workers needed for production is reduced. In other words, as the capitalists invest more constant capital into technology, the variable capital invested in labor power is reduced. The result of this is that the demand for living labor is decreased by the development of industry as technology plunges millions into unemployment, while those still employed live precariously under threat of unemployment.

In other words, the general law of capitalist accumulation is that it accelerates the working class being supplanted by machinery, while those cast into unemployment act as a reserve army of labor for capital, driving down wages overall as a result of the large supply of workers in need of employment.

The workers, of course, organize and fight back to resist this - to raise wages and improve working conditions, counterbalancing this somewhat. But nevertheless, as a general tendency the worsening position of the working class in the capitalist mode of production holds true. We can see this very well in the ever-increasing wealth inequality between the working and oppressed people on the one hand, and the rich on the other hand.

The result of all of this is crisis. The capitalists are compelled by competition amongst themselves to achieve the highest rate of profit. The nature of this competitive drive is that those capitalists who cannot achieve this are crushed by their more ruthlessly efficient competitors. So, they must always update and develop the productive forces in order to increase efficiency, expand production and extract as much surplus value from the workers as they can. But demand is limited by the purchasing power of the masses of the people, who are being squeezed tighter and tighter. The wages of the working class cannot afford to buy all that is produced, leading to overproduction.

Simply put, these crises of overproduction mean that commodities are produced far in excess of effective demand, resulting in difficulties in finding markets for those commodities, falling prices and then restriction of production. This leads the economy into a period of contraction, stagnation, recession and even depression. Currency manipulation, speculation and bank failures can worsen these crises and change some of the particulars, even leading to problems of inflation as they scramble to find ways out of the crisis.

But since the crisis of overproduction generally causes prices to fall, the capitalists will take this opportunity to replenish and replace obsolete machinery, update technology and position themselves to overtake their competitors. The big capitalists will consume the enterprises of the smaller capitalists, and over time the economy will begin to recover. But this recovery will be at the expense of the waste and destruction of the excess commodities and productive forces, and the further destitution of millions. And these cycles of boom and bust repeat themselves again and again.

Dialectically, these crises are rooted in the fundamental contradiction at the heart of the capitalist mode of production: the contradiction between social production and private accumulation. The social character of production, the division of labor, specialization and efficiency lead to ever expanding production, while the accumulation of profit and wealth by the capitalist class at the expense of the workers means the working class simply cannot afford to purchase what is produced.

The reality is that these crises of overproduction demonstrate to everyone the limits of the capitalist system. They show exactly how the capitalist relations of production act as fetters, as chains, binding the development of the productive forces. If not for these fetters - the relationship of ownership, of class society - the expansion of production would be a force to eliminate scarcity and toil. Capitalism’s productive relations stand in the way of that. As long as things continue like this, we will never be free from these objective laws of capitalist crisis. Only socialist revolution, turning this system upside down, can put an end to these destructive cycles of crisis and ruin and create the basis for a new, just, society.