Malthus and Sismondi vis-a-vis Periodical Crises
When periodical crises started affecting the market in the early nineteenth century, underconsumption authors interpreted them not as short-term phenomena but rather as the consequence of a long-term tendency of capitalist accumulation to overproduction.
Malthus is the most important underconsumption author, and his analysis on the subject is direct. Two premises are needed. First, Malthus shares Ricardo’s view about the different trend between profit and rent. With the increase of accumulation, profit tends to diminish while rent tends to increase. However, Malthus (1820, bk. 1, chap. 3, sec. 1) believes that rent is not a consequence of monopoly but rather of a specific quality of the soil, because land is able to sustain more people than those needed for its cultivation (this reminds the physiocrats). Besides, since land revenue never drops with an increase in cultivation, it represents a source of enjoyments for all (ibid., sec. 9: 215-17).
Regarding the second premise, Malthus says wage levels depend on the customs of different peoples. In some countries, workers are used to consume all production in excess of bare necessities to raise children (that is, in the increase of population). In other, more refined, countries workers use this surplus for comfort.15 Customs determine the subsistence level, which can be different in different countries. However, wages always tend to stabilize themselves at the given subsistence level due to the competition between workers. For example, if technical progress causes a sudden increase in the resources for workers, the subsistence level remains stable, because habits change much more slowly than accumulation. The consequence is that the increase in productivity only causes population growth (ibid., bk. 2, chap. 1, sec. 3).
However, according to Malthus, a stable increase in the consumption levels of productive workers cannot be an incentive for accumulation.
First, because workers prefer indolence rather than working more to consume more; second, because an increase in productive workers’ consumption would erode profits and extinguish the incentive to invest (ibid., 314-15, 319-20 and 326). This conviction was shared by the other classical economists, and it led them to the theory of wage fund.Malthus’s conclusion is that when accumulation grows faster than demand, the consequent surplus of goods causes gluts on the market because workers cannot absorb such a surplus even if they increase their habits of consumption (because habits change slowly) or through the increase in population, as Ricardo maintains, because this increase requires 16 or 18 years to arrive to the labor market (ibid., 319-20).16
Malthus interprets capital accumulation as a transformation of a part of the unproductive workers (he says, workers employed in personal services) into productive workers. Thus, when accumulation goes on rapidly, it generates a surplus of goods without increasing the demand for final consumption (ibid., 360 and 398).
In terms of social classes, Malthus maintains that capitalists tend to save in order to invest, so their consumption cannot match the increase in products. Workers cannot significantly increase their consumption without hindering profits, then accumulation. Finally, landowners’ consumption does not always suffice to absorb the excess of goods; only unproductive workers’ consumption can eliminate gluts, so they should not be reduced in number by accumulation. It is the latter that should be slowed down (ibid., 404-5).
Ricardo, adds Malthus effectively, often speaks as if saving were an end, not a means. It is erroneous to say that there are no limits to saving and investment. It is even dubious that man’s desires are unlimited (ibid., 401-2).17 Malthus (ibid., 316ff) also criticizes Say’s law and the authors who support it (Mill, Ricardo, John R. McCulloch).
Like Malthus, Sismondi (1819, 51 and 90) agrees with Smith that saving is the very basis of accumulation.
In his most mature economic work, the Nouveauxprincipes, he effectively describes the insurmountable tension hidden in accumulation. The only natural end of accumulating the fruits of labor, he says, is happiness. There is a real increase in wealth only when national happiness increases (ibid., 51). However, with accumulation going on, the number and the types of products increase, while workers get poorer and poorer. This is the cause of crises, which increase in number and violence. This means that in rich nations accumulation is determined not by needs but rather by the abundance of capital. This is why it overcomes consumption and produces “a cruel poverty” (ibid., 367-68).The arguments Sismondi uses in his powerful picture are, unawares, double-faced. On the one hand, he complains that workers are paid too little, so they cannot buy the excess of what is produced. In a sense, they are deprived of the major part of the result of their own work. Instead of working to satisfy their own needs, they work for the luxury of the rich. Instead of working in order to rest, they work to make some others rest (ibid., 78-80; see also Sismondi, 1820-27, 396-97). On the other hand, capitalists tend to produce too much so that production is no longer aimed at satisfying the needs of the producers (Sismondi, 1819, 75-76; see also Sismondi, 1820-27, 401-2).
Then, Sismondi opens a prospect for a solution: if workers were to get a bigger share of social wealth, they could have access to luxury goods (comforts). The latter’s increase is unlimited, while the increase of necessary goods is limited by natural needs. However, he states—like Malthus—that in order to overcome gluts, unproductive laborers are needed (Sismondi, 1819, 77-78). The last three chapters of the book describe the mechanism of workers’ expulsion caused by accumulation and explain how workers need a social protection (ibid., 312-68).
Sismondi’s (1820-27) answer to his critics is an effective synthesis of his view of capital accumulation.18 The first essay is an acute criticism of Say’s law, which Robert Torrens had largely used against Sismondi’s book.
Among other things, he notes that a total compensation of production and consumption would be possible if there were only basic goods, and all people were forced to always consume the same things. But, since superfluous goods exist, any variation fancied in one individual’s consumption would create a break in the general equilibrium between production and consumption (ibid., 390). In another point—against the thesis that crises are never general but are only due to inconsistencies between single sectors—Sismondi observes that when gluts alternate among the different sectors, the result is equal to a permanent excess in production, that is, a general glut or saturation (ibid., 402-3; he often repeats these terms.)In the second essay, Sismondi criticizes Ricardo and Say for being in favor of an indefinite increase in productivity and in production, despite the gluts caused by the overproduction. He stresses he is not against technical progress, which increases productivity and makes a part of labor superfluous. Rather, he is against the “modern organisation of society, which does not protect workers from excessive competition” (ibid., 433). Following Malthus, he shows examples of the ancients who, as a way to prevent overproduction, provided employment through the implementation of public works. He concludes that he is not able to find out which is the right way to organize production, but he tries to show economists that the present way is wrong (ibid., 440-48).
In his last economic work Sismondi states that while other economists try to speed accumulation up, he tries to slow it down. He adds that intellectual workers are also redundant in those times and that the poor must be discouraged from trying to change their social condition through intellectual labor. Society has to watch that everyone develops his intelligence in proportion to his proper social status (Sismondi, 1837-38, tome 2, essay 13: 149 and 191-92). Of course, this proposal is disastrous. It would impede any economic and civil progress.
Despite his confusion and contradictions, Sismondi best shows the basic difficulty in which classic economists are caught. Their accumulation model is based on the assumption that final productive consumption cannot increase but to the detriment of investment. This hypothesis necessarily drives to the impossibility of accumulation itself in the long run.19
Malthus and Sismondi seem unaware of the deep difference between their own analyses about the causes and remedies of the crises. As to the causes, both authors accept capitalist accumulation, but they see in it a distortion of the natural aim of production, that is, consumption. However, Sismondi attributes this flaw mainly to low wages and the consequent lack of demand. Malthus sees the limit in the tendency to transform all wealth in capital, without leaving the due room to comforts and luxuries (which, he implies, are external to investment logic). Then, for Malthus the lack of demand mainly comes from insufficient unproductive consumption.
The remedies are even more distant. Sismondi asks to move part of the surplus— generated by accumulation—from profits to wages. This would also slow accumulation down. Malthus, more radically, asks to move part of the surplus from investment to unproductive consumption and unproductive labor.
In the end, underconsumption authors are not able to show an alternative to accumulation’s shortcomings. Besides, their forecast of a failure of accumulation has been disproved by experience.
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