MIA > Archive > Fraina/Corey Archive > Decline of Am. Cap.
IT seems true to say: man produces to consume. But that is true only of benighted savages and enlightened communists. Capitalist production aims to make profits. Consumption is subordinate to production, and consumption grows incidentally, as a mere by-product of the accumulation of capital. The worker works to consume, but capitalist production permits him to work and consume only if profits are thereby realized to enrich the owners of industry. Capitalist enrichment results from accumulation, not from consumption, which is a necessary evil. But the drive for the production of surplus value, for an increasing and absolute production, expansion, and accumulation of capital, necessarily restricts the consuming power of society (cf. the decline of wages relatively to profits). Production and consumption, instead of being complementary, are in fundamental antagonism.
Most of the early bourgeois economists practically ignored consumption, considering it merely an aspect of exchange. With the enormous increase in the productive forces of society and the multiplication of goods, economists began to consider the problem of consumption. But they did so in terms of distribution within the limits of existing economic relations, completely ignoring the fact that the problem was created by capitalist production itself. The problem was considered solved by the pre-1929 “new capitalism.” But, aggravated by multiplying contraditions, the antagonism between production and consumption flared up in the most disastrous of cyclical depressions.
Now Niraism (and state capitalism in general) proposes to solve the antagonism between production and consumption, which involves the antagonism between profits and wages. President Franklin D. Roosevelt says: “We can make possible by democratic self-discipline in industry general increases in wages and shortening of hours sufficient to enable industry to pay its own workers enough to let those workers buy and use the things that their labor produces.” ... General Hugh Johnson, Administrator of the NRA: “Of course we are concerned with profits. The idea is to restore equilibrium, to establish and maintain purchasing power. You cannot have business without the investment of capital, and you cannot have that without profits. During the intense drive for recovery the first emphasis should be put on purchasing power rather than profits because we think that is the quickest way to regain profits.” ... A.J. Morris, banker: “The sum total of all the revolutionary legislative and administrative policies upon which we have embarked embodies the single objective ‘stimulation and stabilization of purchasing power’.” ... Prof. Rexford Guy Tugwell, economist and rationalizer of Niraism: “Unless the agricultural, the laboring and the office worker groups in America, who comprise in all America the great body of consumers, are provided with buying power, our whole economic structure falls into idleness and ruin. Only if it [Big Business] is definitely governed [can it] assure a general well-being making possible a continuous mass consumption.” ... E.A. Filene, businessman, who prophesies (again!) the abolition of poverty: “It is not only possible to abolish poverty, but to raise the masses into a state of well-being.” [1]
The pre-1929 prophets of prosperity (among them, damningly enough, Tugwell and Filene) used the same words: production depends upon consumption: as the workers are the largest consumers, prosperity depends upon and is necessarily accompanied by increasing consumption among the workers. [1*] ... An economic historian, in 1928: “Gradually, consuming power was recognized to be not only the barometer of good times but also their determining element. Hence the cultivation of consuming power became the direct concern of manufacturers.” ... The president of the National Industrial Conference Board, in October, 1929, while the cyclical breakdown was developing and several weeks before the stock market crash: “A definite philosophy has arisen the trend of American business policy is toward creation of widespread consumer purchasing power by providing high wages. There is being established a ‘benevolent circle’ in place of the vicious circle, extending from high wages to high consumer purchasing power, to increased demand for manufactured goods and services, and to still greater industrial production.” ... And a European economist, in 1929: “The disastrous business slump of 1920-21 made a deep impression upon the minds of American businessmen. It was realized as never before, that industrial prosperity depends not only upon the ability to produce but also upon consumption keeping pace with production.” [2]
This great “principle” was no discovery. ... In 1889 David A. Wells, an American economist, said: “We produce to consume, and we consume to produce, and the one will not go on independently of the other. An increase in the production of all useful and desirable commodities and services follows every increase in the ability of the masses to consume.” ... Twelve years earlier another American, frightened by the great strikes of 1877, which he condemned as “insurrectionary” and “communist,” urged, in “the best interests of society, the interests of the capitalists themselves,” raising the purchasing power and consumption of the workers: “The number of laborers who can buy must be large, or many of those who produce to sell will have little or nothing to do. Buyers are as important, in order to have prosperity, as sellers.” ... And Ira Steward, an early American labor leader, who believed the workers would eventually “consume” the capitalists out of private ownership: “Wealth cannot be consumed sparingly by the masses and produced rapidly. If the worker obtains less he spends less.” [3]
The “principle” was neither new nor American in its origin. Jacob Vanderlint, an English merchant-economist, enunciated it in 1734, when capitalism was in its revolutionary youth:
“The labouring People in general are but half the Consumers they ought to be. ... By making the Poor fare harder, or consume less than their reasonable Wants in that Station require, they being the bulk of Mankind, would affect the consumption of Things in general so mightily, that there would be a want of Trade and Business amongst the other part of the People. ... If the labourers become much greater consumers this would certainly make abundance of Trade and Business ... Increase the power of labourers to buy half as many more necessaries for their support and comfort, and there would be almost half as much more Trade and Business ... Raise the wages of the labouring People and augment the profits of the trading part.” [4]
The “principle,” in spite of its apparent economic logic (applicable only under non-capitalist conditions), contradicts the basis of capitalist production. An increase in consumption is profitable regardless of who the consumers are and only if it represents an increase in the output of capital goods. That is the tribute of the profit economy. As long as the output of capital goods rises consumption may increase, because consumer purchasing power is created (wages, part of salaries and profits), and is spent wholly on the output of the consumption goods industries, not on the output of the industries producing capital goods. These were the conditions in the epoch of the upswing of capitalism, when the mechanization of older industries, the development of new industries, and the industrialization of new regions resulted in an increasing output and absorption of capital goods. Even then, however, the antagonism between production and consumption flared up in recurrent cyclical crises and breakdowns. The antagonism creates a permanent crisis in the epoch of the decline of capitalism because production and consumption are no longer stimulated by a constantly greater output of capital goods.
1*. Among the ballyhoo-makers of prosperity who glorified Niraism was the advertising promotion staff of True Story, using the old words and tune: “Within the past ten years America has been making social and economic changes on the face of the earth ... The purpose of [Niraism] is to provide this great mass market [the workers] with still greater [!] buying power. If you have the mass production you must have mass consumption ... This method of securing national recovery is already working; it had begun to work long before the president’s proclamation.” Advertisement, New York Times, September 12, 1933.
1. New York Times, July 25, 1933; September 5, 1933; August 13, 1933; Rexford Guy Tugwell, The Ideas Behind the New Deal, New York Times, July 16, 1933; September 13, 1933.
2. Victor S. Clark, History of Manufactures in the United States (1928), v.II, p.838; Magnus W. Alexander, New York Times, November 4, 1929; P.W. Martin, The Technique of Balance: Its Place in American Prosperity, International Labour Review, October, 1929, p.494.
3. David A. Wells, Recent Economic Changes (1889), pp.330, 381; J.A. Dacus, The Great Strides (1877), p.19; Dorothy W. Douglas, Ira Steward on Consumption and Production, Journal of Political Economy, August 1932, pp.536-37.
4. Jacob Vanderlint, Money Answers All Things (1734), pp.64, 66, 76, 87.
Last updated on 29.9.2007