Overproduction Of Capital Essay

Length: 4 pages Sources: 1 Subject: Economics Type: Essay Paper: #15578175 Related Topics: Capitalism, Conceptualization, Industrial Revolution, Economic Recession
Excerpt from Essay :

Overproduction

In a capitalist economy, production is encouraged by the profit motive, not necessarily need. Prior to the capitalist economy, in the agrarian economy, production was roughly in line with need. The reason for this was the high costs -- capital, time and labor -- that were associated with the production of goods. These high costs ensured that production was largely limited to what was needed, or for what there was a known market. There were trading markets throughout Europe and the East, and so there was the potential for overproduction, but overproduction came at a high enough price that discouraged it. Finding suitable markets for an undesirable good was not necessarily easy, and there may have been associated disposal costs.

With the agricultural and industrial revolutions, the costs of production declined. Marx outlines in the Communist Manifesto that the agricultural revolution and the decline of the old social structures of the agrarian age created surplus demand, which the innovations of the industrial revolution sought to meet. The machines of the industrial revolution, in particular the machines have allowed for excess production to occur. The new industrial class, whom Marx terms industrial millionaires or the modern bourgeoisie, is said to hold most of the political power in the economy, and have helped to create the global market in order to allow them to increase their production.

One of the issues with this -- and Marx has many -- is that this leads to an excess of production. Goods are produced, in essence, because they can be. The problem of selling these goods is something to be addressed later -- usually via the aforementioned political channels and global market. In economic terms, the incremental cost of excess production is relatively low with modern (19th century) industrial scale. With at least the potential for moving costs to a variety of different markets and perhaps by this point a cost of disposal of excess goods...

...

If the goods can be sold, there are tremendous profited to be reaped. If the goods are not sold, the cost is relatively low because of the new production efficiencies. The cost of not selling something is not as great as the potential profit to be gained from producing it, and then subsequently seeking a market for that good.

To Marx, overproduction is the root of capitalistic economic crisis. Marx sees overproduction as having two forms -- the overproduction of goods and the overproduction of capital. The former is the natural consequence of the efficiencies of scale and potential for new markets as described above. The overproduction of capital occurs when industry is able to sell its goods and earn profits. Some of that capital will be reinvested to further increase capacity and some of that capital will not be reinvested, or may be invested in another business.

A capitalist overproduction crisis is described in the Communist Manifesto as follows:

"The productive forces at the disposal society no longer tend to further the development of the conditions of bourgeois property; on the contrary, they have become too powerful for these conditions, by which they are fettered, and so soon as they overcome these fetters, they bring disorder into the whole of bourgeois society, endanger the existence of bourgeois property. The conditions of bourgeois society are too narrow to comprise the wealth created by them."

Now, this section does not explicitly explain what happens. Fetters are metaphoric, and productive capital is inert. Marx does not in a meaningful way elaborate on what exactly is occurring to cause this crisis. He describes what a crisis might look like in abstraction, but his description lacks the specifics that can be addressed in economic discourse. This is nothing new, of course -- there is no shortage of circular logic in the Communist Manifesto. But it leaves the reader to attempt to make sense of his explanation. In essence, capital must be re-invested, or it will lose its values. Thus, capital can be invested, or destroyed. But the investment of capital often comes with diminishing returns. This…

Sources Used in Documents:

Reference

Marx, K. (1848) The Communist Manifesto


Cite this Document:

"Overproduction Of Capital" (2015, April 03) Retrieved January 23, 2022, from
https://www.paperdue.com/essay/overproduction-of-capital-2150755

"Overproduction Of Capital" 03 April 2015. Web.23 January. 2022. <
https://www.paperdue.com/essay/overproduction-of-capital-2150755>

"Overproduction Of Capital", 03 April 2015, Accessed.23 January. 2022,
https://www.paperdue.com/essay/overproduction-of-capital-2150755

Related Documents
Economic Theories Marx Viewed Capital
Words: 1511 Length: 5 Pages Topic: Economics Paper #: 59081437

Both Keynes and Kalecki use Marx's theories as a starting point but quickly moved into new ways of thinking, particularly with regard to effective demand being oriented toward the demand-side. Marx had remained rooted in supply-side demand function, rejecting Say's Law only to note that demand did not necessarily meet supply. Works Cited: Marx, K. (1867). Das kapital: A critique of political economy. Mandel, E. (1995). Marx's theory of crises. International Viewpoint.

Economics Scenario in the First Phase, the
Words: 1762 Length: 6 Pages Topic: Economics Paper #: 82823218

Economics Scenario In the first phase, the price of coffee increased and thus lured producers into the market. This caused the supply to move up the curve. The increased supply caused the demand to decrease and thus caused the overproduction. The mechanism is shown below graphically. The graph shows the coffee market at an equilibrium price of 3.25. The increase in price caused the supply to rise and the demand to fall. This

Marx's Theory of Exploitation
Words: 2357 Length: 6 Pages Topic: Economics Paper #: 31715282

Marx's Evolving Theory Of Exploitation As the author of the definitive Communist Manifesto, Marx was arguably one of the most influential of 19th century economists, and certainly one of the most influential of the revolutionaries of the era. Because of the overwhelming influence which he had on the political and philosophical history of the world, it is understandable that he has a great and even fundamentalist following. However, there remains a

Antigua Guatemala Coffee
Words: 5779 Length: 18 Pages Topic: Business Paper #: 30151335

Antigua Guatemala Coffee Antigua Guatemala International (AGI) will be a manufacturer and exporter of Guatemalan coffee to Japan and the global. AGI will use a new system in the food and beverage industry to offer Antigua Guatemala coffee in a time-efficient and convenient way. AGI will provide vendors, retailers, and cafes with the ability to buy freshly brewed Antigua Guatemala coffee. It will be a high quality option to the institutional

Ecologism Marxism
Words: 1064 Length: 4 Pages Topic: Government Paper #: 57126744

Sociology Marxist Ecologism Although ecologism is rapidly developing into a political ideology in its own right, its widespread acceptance and influence continues to rely on its relationship with other, existing ideologies. One of the most important, and influential, of the 'isms' is Marxism, and the link between it and ecologism is increasingly becoming the subject of academic and political study. This is especially true within the field of environmental sociology, where the

Economic Effects of the Sharing Economy
Words: 1345 Length: 4 Pages Topic: Economics Paper #: 24336250

Sharing Economy Deadweight Loss When it comes to the environment impact of humans on the planet, overconsumption is not necessarily the issue; it is overproduction. Overproduction creates a situation where there is more supply than there is demand. Thus, some supply in the marketplace goes unused. This is an inefficient use of resources, or a deadweight loss to society (Investopedia, 2015). There are a number of different reasons why deadweight loss