Chesnais: Excess Capital, Waste and Crash

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Wed Sep 30 21:36:51 PDT 1998


Chesnais underlines at the outset that the Asian NICs have served as "an escape route for the excess capital of the OECD member countries."

This reminds me of analysis by Louis Boudin some 90 years ago: "WASTE is the safety valve of capitalism." (The Theoretical System of Karl Marx, 1907. Monthly Review Reprint, p.252)

Perhaps the export of overaccumulated capital allowed the temporary escape from stagnation through the construction of massive capacity which while creating demand in the building up stages finds upon completion no buoyant markets to serve. Waste turns out to have been a safety valve of capitalism.

Boudin develops this argument as a critique of the great revisionist Tugan Baranowski.

I shall reorganize the argument so it begins where Chesnais did--with the export of excess capital (by the way, Chesnais also finds Mattick's Economic Crisis and Crisis Theory the best overview available):

"...after a crisis there is a superabundance of capital which is seeking employment. As the ordinary fields of occupation, particularly at home, are well filled, the capitalists look for some new fields wherein their capital could be profitably employed. Knowing that it would be useless to manfacture some new consumption goods, or some machine for the purpose of manufacturing such goods, for the reason that the capacity of our society for consumption is limited, they start out to create new demands by creating new civilization. Civilization has proved a good customer, and capitalists turn to it instinctively whenever hard pressed. So the iron threads of civilization begin spinning at home and abroad, but mostly abroad, the missionary spirit of capitalism being well known. This creates a demand for vast amounts of capital and labor. Things begin to hum,--the prospects are bright. The markets are relieved of surplus product, and trade has revived. An era of prosperity has set in. The more crazy the 'civilizing' undertaking, particularly the longer it takes to finish it, and obtain results, the greater the prosperity and the longer it lasts." (p.248)

Boudin had earlier explained why such speculative build ups can be sustained:

"It is the peculiar nature of such means of production that their usefulness or uselessness cannot be definitely ascertained until fully completed and operated for some time. The result is that immense masses of such 'means of production' are constantly produced without any actual necessity therefor, and often for purely speculative purposes. While these 'means of production' are being produced, and it takes years to complete them, the wheels of capitalistic production revolve merrily, without hitch or stop, notwithstanding the fact that the work may be absolutely useless in whole or part, and that the value supposed to be created in their production, or at least a large part thereof, will never be realized. The wiseacres of capitalism, like Tugan Baranowsky, listen to the siren song of these merrily revolving wheels, and draw in their imagination alluring pictures of the endlessness of capitalism wound around an endless chain of 'means of production.' Of course there is bound to come a rude awakening. The production of these particular 'means of production' turns out to be the merest waste." (p.245)

And so Boudin argues:

"But the undertaking has to be finished some day, and the harvet must at last be gathered in. Then it is discovered that the undertaking was a failure. The railroads, it turns out, were not necessary where they were built, for they have nothing to carry when they are ready for business. The undertaking goes into liquidation. The vast amounts of capital, the glorious piles or stretches of means of prodction, now represent so much waste, for capital which does not pay dividends is not capital according to capitalistic laws. Then the crisis is on--things go to smash all around. The crisis is not limited ot those interested in the particular undertaking. First, because the ramifications of modern capitalistic undertakings are so extensive and complicated, particularly by reasn of our credit system, that no serious break can occur anywhere but the whole system will crumble to its foundations. (!!!-rb)

"Secondly, because the large number of men employed in the producing of the now defunct 'means of production' are now thrown out of employment, thereby weighing heavily on the labor market and emanding charity from their masters. And thirdly, because the apparent prosperity incident to the continued production of the large 'means of production' has caused a general rush of production to an unwarranted extent, even in spheres which are not in any way directly connected with the particular undertaking which brought about the prosperity............and the crisis." (p.248)

best, rakesh



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