The Contributions of Marx, Keynes and Kalecki
Chapter 3: General Overproduction Crises
3.1 INTRODUCTION Marx’s rejection of Say’s Law allowed him to show that general overproduction crises are possible. This chapter is concerned with the exposition of Marx’s explanation of how such crises actually occur and the reasons why, for him, the rejection of Say’s Law does not imply different outcomes. Marx like Ricardo and Malthus, always argued that the consequence of an insufficient level of aggregate demand is a general overproduction crisis.1 This is because he held that there is a tendency for capitalist ﬁrms to produce and invest as much as possible, until a crisis takes place. Each particular capital operates on a scale which is not determined by individual demand (orders etc., private need), but by the endeavour to realise as much labour and therefore as much surplus-labour as possible and to produce the largest possible quantity of commodities with a given capital. (Marx, 1968, p. 484) If this tendency exists, any fall in the level of aggregate demand (or even a rise smaller than the increase in aggregate supply) would lead to overproduction: up to that point ﬁrms have been producing to capacity and the insufficiency of effective demand must cause part of the commodities already produced to remain unsold, or to be sold at less than their normal price. This line of reasoning raises two questions: i) what makes capitalist ﬁrms produce to capacity and invest at the highest possible rate? ii) how does a general overproduction crisis come about? To answer the second question is easier;...
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