Date: Fri, 3 Apr 1998 12:36:26 -0500 (EST)
From: Gernot Kohler <gernot.kohler@sheridanc.on.ca>
To: wsn@csf.colorado.edu
Subject: inadequate demand in the world system (Mandel)
This book contains interesting views on global demand:

REFERENCE

Ernest Mandel
The Second Slump:
A Marxist Analysis of Recession in the Seventies
London, England: NLB, 1978
[revised and translated from the 1977 German edition]
ISBN 86091 0121

Mandel's work implies a world system view. _The Second Slump_ addresses, 
inter alia, the problem of global demand (effective demand in the world 
system), both in terms of (1) general theory and (2) concrete historical 
analysis. (The book does not use the terms "world(-)system" or "global 
demand" as such.)



A. GENERAL THEORY

Chapter 5 ("Marxism and the Crisis") contains the general theory of the 
book. Mandel observes that, in Marxism, "(t)wo great 'schools' have 
arisen. One claims that the crises are caused by the under-consumption of 
the masses (...), the other that they are caused by over-accumulation 
(...). This debate is but a variant of the old debate between those who 
explained the crises by 'insufficient aggregate demand' and those who 
explained them by 'disproportionality'." (p. 165)

Mandel goes on criticizing both schools: "both commit the error of 
arbitrarily dividing what is organically linked..."(p. 165) and argues 
that we must "combine" both views. In support he quotes the older Marx, 
as opposed to the younger Marx, namely:

QUOTE: "the conditions of direct exploitation and those of realizing it 
are not identical ... The first are only limited to the PRODUCTIVE POWER 
OF SOCIETY, the latter by the proportional relation of the various 
branches of production and the CONSUMER POWER OF SOCIETY." [Marx, 
Capital, vol. 3, p. 244] (Mandel, p. 165-166, my emphasis)

Similarly, Mandel states that:

QUOTE: "The capitalist mode of production ... is both a system oriented 
towards the PRODUCTION of a growing mass of surplus-value (...) and a 
system in which the real appropriation of this surplus-value is dependent 
on the possibility of ACTUALLY SELLING commodities ..."(p. 166, my emphasis)

Mandel goes on discussing over-accumulation, under-consumption, anarchy 
of production, falling rate of profit and states that:

QUOTE: "Whatever the deeper meanderings of the analysis, the first 
phenomenon that must be grasped is this sharp break in the UNSTABLE 
EQUILIBRIUM BETWEEN SUPPLY AND DEMAND of commodities..."(p. 169)

There you have it: the importance of demand in Mandel's theory of crises.



B. CONCRETE HISTORICAL ANALYSIS

In the chapters which deal with the concrete historical analysis of the 
world system and its "second slump" (title of the book), Mandel points to 
the inadequacy of demand in the world system as a major problem. Here are 
examples:

QUOTE 1: "Contraction of world trade" ... "became inevitable once this 
recession had spread to all the imperialist countries, since they still 
constitute the predominant sector of the world market (of 'worldwide 
available PURCHASING POWER')." (p. 19, my emphasis)[refers to 1970's]

QUOTE 2: "neo-Keynesian recovery techniques" [sc. 1975-76]: "Because of 
enormous injection of additional PURCHASING POWER into the economic 
circuit, the recession was effectively halted after about a year or a 
year and a half. After this a recovery began." (p.62, my emphasis)

QUOTE 3: "DEMAND for consumer goods on the domestic market was no longer 
rising after it acted to 'DETONATE' the recovery." (p. 96, my emphasis) 
[refers to G-7 countries 1975-77]

QUOTE 4: re Third World demand: "... the semi-colonial countries continue 
to occupy a marginal position in the world market ..." (p. 137) "This is 
the fundamental reason why the restructuring of the world market now 
under way will not be able to stimulate a new accelerated expansion of 
the international capitalist economy. (p. 138)

"To take the example of the EEC countries, their exports to Brazil, India 
and Pakistan stagnated or declined throughout 1975, 1976, and 1977. These 
three countries, inhabited by a total of nearly 800 million people, 
PURCHASE fewer commodities from the nine Common Market countries than does 
Austria alone, with its less than 8 million inhabitants!" (p. 138, my 
emphasis)

QUOTE 5: Food money: "Nothing illustrates the capitalist character of the 
market economy and its unjust and inhuman consequences better than this 
spectacle of half of humanity afflicted by hunger not because of lack of 
food products, but because MONEY DEMAND cannot keep up with physical 
demand." (p. 146, my emphasis)


C. CONCLUSION
Ernest Mandel was of the opinion that effective demand in the world 
system is important and that effective demand in the world system tends 
to be inadequate.

-gk