Table Of ContentPREFACE AND ACKNOWLEDGEMENTS
Library of Congress Cataloging in Publication Data This book is intended as a Marxist analysis of underconsump
tion theories. It is at once a history and a critique-for
Bleaney, Michael Francis underconsumption theories are by no means dead. Their
Underconsumption theories.
influence may still be discerned in the economic programmes put
forward by political parties and trade unions, and in articles and
Bibliography.
Includes index. books on the general tendencies of capitalism. •
1. Business cycles. 2. Consumption (Economics) No final conclusion as to the correctness of underconsumption
3. Economics-History. I. Title. theories is reached, for too little theoretical work of the necessary
HB3721.B55 330.1 76-26935
quality has been carried out to justify such a conclusion. But the
ISBN 0-7178-0476-3
weight of the theoretical evidence would seem to be against them.
© M. F. Bleaney Much of their attractiveness in the end stems from the links which
they maintain with the dominant ideology of capitalist society and
the restricted extent of the theoretical break required to arrive at
an underconsumptionist position. This, in con junction with
certain obviously appealing conclusions which emerge from
them, has sufficed to ensure their continuing reproduction in the
working-class movement.
Not all of the authors discussed here an~ in fact
underconsumptionist - Karl Marx and Rosa Luxemburg, in
particular, are not - but all of them have been accused of being
so at one time or another. Two main strands of undercon
sumptionism are identified, whose main propositions are
somewhat different. One strand - the Malthusian heritage -
emphasises the absolute level of saving, while the other -
stemming from Sismondi - emphasises the distribution of
income per se as the cause of crises. One interesting question is
why, in the general glut debate of the early nineteenth century all
those who argued for the possibility of a general glut hould have
been underconsumptionists. An explanation of this, in terms of
Produced by computer-controlled phototypesetting, the classical conception of investment and the relationship
using OCR input techniques, and printed offset by
between Adam Smith and the Physiocrats, is given in Chapter
UNWIN BROTHERS LIMITED
The Gresham Press, Old Woking, Surrey Five.
England 3
PREFACE AND ACKNOWLEDGEMENTS
Library of Congress Cataloging in Publication Data This book is intended as a Marxist analysis of underconsump
tion theories. It is at once a history and a critique-for
Bleaney, Michael Francis underconsumption theories are by no means dead. Their
Underconsumption theories.
influence may still be discerned in the economic programmes put
forward by political parties and trade unions, and in articles and
Bibliography.
Includes index. books on the general tendencies of capitalism. •
1. Business cycles. 2. Consumption (Economics) No final conclusion as to the correctness of underconsumption
3. Economics-History. I. Title. theories is reached, for too little theoretical work of the necessary
HB3721.B55 330.1 76-26935
quality has been carried out to justify such a conclusion. But the
ISBN 0-7178-0476-3
weight of the theoretical evidence would seem to be against them.
© M. F. Bleaney Much of their attractiveness in the end stems from the links which
they maintain with the dominant ideology of capitalist society and
the restricted extent of the theoretical break required to arrive at
an underconsumptionist position. This, in con junction with
certain obviously appealing conclusions which emerge from
them, has sufficed to ensure their continuing reproduction in the
working-class movement.
Not all of the authors discussed here an~ in fact
underconsumptionist - Karl Marx and Rosa Luxemburg, in
particular, are not - but all of them have been accused of being
so at one time or another. Two main strands of undercon
sumptionism are identified, whose main propositions are
somewhat different. One strand - the Malthusian heritage -
emphasises the absolute level of saving, while the other -
stemming from Sismondi - emphasises the distribution of
income per se as the cause of crises. One interesting question is
why, in the general glut debate of the early nineteenth century all
those who argued for the possibility of a general glut hould have
been underconsumptionists. An explanation of this, in terms of
Produced by computer-controlled phototypesetting, the classical conception of investment and the relationship
using OCR input techniques, and printed offset by
between Adam Smith and the Physiocrats, is given in Chapter
UNWIN BROTHERS LIMITED
The Gresham Press, Old Woking, Surrey Five.
England 3
4
This book is a revised and extended version of a Ph.D. thesis
written for the University of Cambridge over the period 1971 to
197 4. I should like to thank the Social Science Research Council,
my parents and Clare College for financing my studies during
this period.
It would be impossible to do credit to all the discussions I have
CONTENTS
had which have helped me to develop the ideas presented here.
However, I should particularly like to mention the names of
Maurice Dobb, Brenda Kirsch and Ronald Meek, who have read
and criticised earlier drafts of the work. Above all, I owe a great
debt to Bob Rowthorn, the supervisor of the research, whose 1. What is U nderconsumptionism? 9
continuous encouragement and incisive criticism have been 2. The early British Underconsumptionists 22
invaluable. But any mistakes that remain are entirely my own 3. J.C.L. SimondedeSismondi 62
responsibility.
4. Rodbertus 79
February 1976 M.F.B. 5. Retrospect on the early Nineteenth Century 83
6. KarlMarx 102
7. The Russian Populists 120
8. J .A. Hobson 145
9. Rosa Luxemburg 186
l 0. Lesser Writers of the Inter-War Period 202
11. An Assessment of pre-Keynesian Underconsumption
Theories 208
12. The Modern Scene 220
Bibliography 253
Index 259
5
4
This book is a revised and extended version of a Ph.D. thesis
written for the University of Cambridge over the period 1971 to
197 4. I should like to thank the Social Science Research Council,
my parents and Clare College for financing my studies during
this period.
It would be impossible to do credit to all the discussions I have
CONTENTS
had which have helped me to develop the ideas presented here.
However, I should particularly like to mention the names of
Maurice Dobb, Brenda Kirsch and Ronald Meek, who have read
and criticised earlier drafts of the work. Above all, I owe a great
debt to Bob Rowthorn, the supervisor of the research, whose 1. What is U nderconsumptionism? 9
continuous encouragement and incisive criticism have been 2. The early British Underconsumptionists 22
invaluable. But any mistakes that remain are entirely my own 3. J.C.L. SimondedeSismondi 62
responsibility.
4. Rodbertus 79
February 1976 M.F.B. 5. Retrospect on the early Nineteenth Century 83
6. KarlMarx 102
7. The Russian Populists 120
8. J .A. Hobson 145
9. Rosa Luxemburg 186
l 0. Lesser Writers of the Inter-War Period 202
11. An Assessment of pre-Keynesian Underconsumption
Theories 208
12. The Modern Scene 220
Bibliography 253
Index 259
5
One of the most dangerous by-products of a period of depression
is the crop of false economic theories which win popular credence
and gain political support. ...
As in all previous depressions the commonest explanation which
is offered to the mass of thinking people is some form of the
l!mderconsumption theory. In the last two years thjs theory has
grown like a forest of mushrooms about us. It claims far more
adherents than any other theory, and the voices of those who
believe in it drown all other counsel in the ears of democratic
peoples. Trade Unionists and employers alike, and even the
authority of the Church itself are enlisted to support the demand
that the purchasing power of the people shall be reinforced.
E.F.M.Durbin, 1934.
7
One of the most dangerous by-products of a period of depression
is the crop of false economic theories which win popular credence
and gain political support. ...
As in all previous depressions the commonest explanation which
is offered to the mass of thinking people is some form of the
l!mderconsumption theory. In the last two years thjs theory has
grown like a forest of mushrooms about us. It claims far more
adherents than any other theory, and the voices of those who
believe in it drown all other counsel in the ears of democratic
peoples. Trade Unionists and employers alike, and even the
authority of the Church itself are enlisted to support the demand
that the purchasing power of the people shall be reinforced.
E.F.M.Durbin, 1934.
7
1
WHAT IS UNDERCONSUMPTIONISM?
THE DEFINITION OF 'UNDERCONSUMPTION THEORIES'
Undertonsumption theories have a long history - and a long
history of influence in the working-class movement - but in
spite of this no general study of them has yet appeared. This
book is intended to fill that gap.
Orthodox economists have generally dismissed undercons
umption theories with contempt, and in orthodox histories of
economic theory underconsumptionist writers, with the excep
tion of Malthus, rarely receive more than a passing reference -
if indeed they are mentioned at all. This might perhaps be
explained by their proneness to element?ry mistakes, but by
itself thac does not seem a sufficient explanation: if we think for
instance of the way writers in the Marxist tradition and indeed
Marx himself have been left out of consideration, it seems clear
that in ,this case the block has been applied even before the
question of technical errors has arisen. Marxist writers have
been ignored because of their basic premises and the implica
tions of their line of approach, and nowadays even many
non-Marxists are prepared to admit that ideological factors have
underfu.in the silence about Marxism in academic circles. It
seems es ea.rial, then, to examine the possible ideological reasons
why underconsumption theories might have been ignored by
the mainscream of Wes tern economic thought.
In thi connection, two things are immediately apparent.
Fu:stly underconsumption theories, even in their tamest ver
sion , have always retained a slant of criticism of capitalist
production. This slant exists independently of the ideology of
the individual writer, since it arises out of one of the general
features of underconsumption theories: their tendency to imply
that ultimatdy capitalism cannot guarantee .comi.nuous full
employment'. and rising livmg standards and is liable sooner or
later ro slip down into prolonged stagnation. Potentially,
1
WHAT IS UNDERCONSUMPTIONISM?
THE DEFINITION OF 'UNDERCONSUMPTION THEORIES'
Undertonsumption theories have a long history - and a long
history of influence in the working-class movement - but in
spite of this no general study of them has yet appeared. This
book is intended to fill that gap.
Orthodox economists have generally dismissed undercons
umption theories with contempt, and in orthodox histories of
economic theory underconsumptionist writers, with the excep
tion of Malthus, rarely receive more than a passing reference -
if indeed they are mentioned at all. This might perhaps be
explained by their proneness to element?ry mistakes, but by
itself thac does not seem a sufficient explanation: if we think for
instance of the way writers in the Marxist tradition and indeed
Marx himself have been left out of consideration, it seems clear
that in ,this case the block has been applied even before the
question of technical errors has arisen. Marxist writers have
been ignored because of their basic premises and the implica
tions of their line of approach, and nowadays even many
non-Marxists are prepared to admit that ideological factors have
underfu.in the silence about Marxism in academic circles. It
seems es ea.rial, then, to examine the possible ideological reasons
why underconsumption theories might have been ignored by
the mainscream of Wes tern economic thought.
In thi connection, two things are immediately apparent.
Fu:stly underconsumption theories, even in their tamest ver
sion , have always retained a slant of criticism of capitalist
production. This slant exists independently of the ideology of
the individual writer, since it arises out of one of the general
features of underconsumption theories: their tendency to imply
that ultimatdy capitalism cannot guarantee .comi.nuous full
employment'. and rising livmg standards and is liable sooner or
later ro slip down into prolonged stagnation. Potentially,
10 Underconsumption Theories Whal i Underconsumptionism? 11
therefore, underconsumption theories have always been grist to DEFINITIONS
the mill of popular anti-capitalist movements, and it should be
The phrase 'underconsumptionism' is quite current in the
added that in many variants they imply support for a strong and
literature on the history of economic thought, of all shades, but
militant trade-union movement, a characteristic which threatens
aaual definitions of it are virtually absent. I propose to use the
to undermine all the carefully constructed arguments, so
following definition, which accords as closely as can be expected
common today, about the need for sacrifice and desertion of
"the militants" at times of crisis. Therefore, without raising at with the general use of the term:
this stage the question of the scientificity of underconsumptioll' An underconsumption theory is a theory of the capitalist
theories, it is clear that their ideological power, inserted into econom which contains both of the following two elements:
contemporary political struggles, is essentially at the service of 1) the idea that a state of depression is not just a phase of the
the working class. industrial cycle or .the result of a temporary conjunction of
Secondly, underconsumption theories, being explicit criti circumstances but is the state towards which the economy
cisms of the dominant schools of thought of their time, were narurall tends in the absence of offsetting factors;
bound to be treated as a negative development by those who saw 2) the idea that this is the result of a persistent tendency
in the increased sophistication and elaboration of these ten towards insufficiency of demand for consumption goods.
dencies the growth of a truly scientific economics. It is still true, Boch elements are necessary. It is quite possible to have a
in spite of the crisis at present being experienced by bourgeois stagnationj t theory of the capitalist economy which does not
economics, that marginalism remains the only general theory single out lack of demand for consumption goods as the cause -
which it has to put forward in opposition to Marxism, and that Steindl's Maturity and Stagnation in American Capitalism, for
the dominant tendency is to treat the history of economic example, deduces a tendency to stagnation by developing a
thought since Adam Smith as a struggle first of all to produce a theory of the investment behaviour of firms in response to such
consistent marginalist theory and then to develop it. Since factors as the rate of profit, degree of capacity utilisation, and
underconsumptionism, like Marxism, contributed nothing to the degree to which investment can be financed from internal
this process, it is regarded as legitimate for histories of economic funds. Equally, to isolate demand for consumer goods as the
thought to ignore it. primary factor in the movement of the economy would merely
These would seem to be the two main factors behind the lack be a theory of the trade cycle that identified consumption as the
of interest shown by orthodox economists in underconsumption leading force. It would not be an underconsumption theory
theories and their history. It is not so clear, however, why no unless combined with the idea that slumps and crises are the
general Marxist study of underconsumptionism has yet ap manife tations of inherent difficulties in capitalist production,
peared. In part, probably, this reflects the penetration of hereas booms are periods in which the difficulties are
underconsumptionism into Marxist economic writing itself. temporarily overcome. This is obviously a different theory from
Because, as will be shown below, many Marxist writers have one which sees economic fluctuations in general as inherent in a
absorbed elements of underconsumptionism into their own capitali t economy, since it is an 'asymmetrical' theory in which
work, it has been difficult for Marxists to arrive at an adequate slumps :repFesent the 'normal' state (unless offsetting factors
definition of underconsumptionism and to carry through a inter\'ene).
thorough analysis of it. For instance, passages in Marx definitely A brief review of the existing literature is perhaps in order
tend in an underconsumptionist direction, and the whole theory here. I; have already mentioned that no general study of
of the immiserisation of the proletariat has obvious undercon . underconsumption theories has existed up till now, but there do
umptionist implications. Thus, although in general (although exist certain 'partial' studies of relevance. Of these, the earliest
not entirely) the Marxist tradition has been hostile to undercons and also the most interesting is the second part of Rosa
umptionism, it has had difficulty in settling accounts with it. Luxemburg's Accumulation of Capital (1913), which discusses in
