Paul M. Sweezy

Monthly Review, Oct, 2004 by Michael A. Lebowitz

The significance attributed to "the falling rate of profit" (FROP) was another such distinction between Sweezy and Dobb (and the classical tradition). Identifying Dobb as an author who had "concluded that Marx meant the law of the falling tendency of the rate of profit to be the primary explanatory principle so far as crises are concerned," Sweezy rejected this conclusion on two important grounds (147-8). Firstly, emphasizing Marx's consideration of "counteracting tendencies," he questioned the theoretical foundations of the FROP tendency with respect to the assumption that the organic composition of capital necessarily increased more than the rate of surplus-value; the formulation, he proposed, was "not very convincing" (102-4).

As critical, however, was that Sweezy argued that Marx's view of crises and business cycles differed significantly from those of mainstream economists who assumed that "the crisis is not the result but rather the cause of a shortage of effective demand" (155). Implicit in the theory of value, he argued, was a theory of crisis which emanated from the inability of capitalists to sell commodities at their value (146). And, at the root of such crises was the contradiction between the production of use-values and the goal of producing surplus-value, the fundamental contradiction of capitalism (172).

This alternative explanation Sweezy labeled an "underconsumption" theory of capitalist crises, and he proceeded to show its undeniable presence in Marx's texts. Yet, there was a critical gap--the theory had never been fully developed by Marx, and subsequent Marxists (like Rosa Luxemburg) who had turned their attention to the question had not succeeded in constructing a logical and detailed theory. The result was that "the outstanding present-day English Marxist economist, Maurice Dobb, assigns a role to underconsumption which is distinctly secondary to that of the falling tendency of the rate of profit" (179).

Completed, however, the underconsumption theory "would have been of primary importance in the overall picture of the capitalist economy" (178). To supplement Marx's work by carefully formulating the Marxian underconsumption theory, then, was the project Sweezy undertook.

The General Theory of Capitalist Stagnation

"The real task of an underconsumption theory," Sweezy proposed, "is to demonstrate that capitalism has an inherent tendency to expand the capacity to produce consumption goods more rapidly than the demand for consumption goods." Such a tendency may be manifested in two forms. Where an increase in capacity leads to overproduction and then curtailment of production, "the tendency in question manifests itself in a crisis." In a second case, however, capacity is not expanded "because it is realized that the additional capacity would be redundant relative to the demand for the commodities it could produce. In this case, the tendency does not manifest itself in a crisis, but rather in stagnation of production"(180).

As Sweezy noted, in either case the existence of such a tendency significantly alters the fundamental questions economists must pose. Marx's comments in Capital imply, Sweezy argued, that: