Underconsumption

The term underconsumption is used in very different contexts, making an unambiguous definition difficult. On one hand, it is a historically and culturally placed concept based on specific premises developed in the classic Western European liberal economic theories of the 16th, 17th, and 18th centuries. Consumption is therein primarily understood as part of a gigantic market mechanism, and underconsumption as a sign of an undesirable development of the system. On the other hand, economic anthropology questions the universal validity of such an approach. From observations in marketless societies, it became evident that economic relations are embedded in the social system to a much greater extent. A comparative analysis shows that the market economy model also has its limits with regard to industrialized societies.

The term underconsumption, therefore, has to be scrutinized against the background of anthropological and sociopsychological reflection on the material world in order to gain a better understanding of consumption patterns and their function in society as a whole.

In the neoclassical economic theories of the 19th century, the premise is that the market economy has self-regulating forces. Hence, a practice of laissez-faire (of nonintervention) can be differentiated, as in the free market the quasi natural level of prices, wages, profit, and production establish themselves, according to Adam Smith's theory of the “invisible hand.” Thereby two basic phenomena—production and consumption—are viewed as reciprocally dependent, as they are decisive in the explanation of the economic and social balance of development forces. In this model, it is assumed that production serves the satisfaction of existing needs of the domestic market, whereby, ideally, all goods produced are consumed. If this balance is perturbed due to external causes (such as wars, ecological disasters, or epidemics) and the domestic market collapses, it is crucial that this is evened out by trade and adequate export.

The interplay between national production and global consumption is thus of great importance. In this context, one needs to distinguish between use values (the goods to satisfy the actual needs of the domestic market) and exchange values (the goods for export), as the production cannot be maintained by consumption on the local market alone but additionally by global trade.

One of the first to reject economic liberalism was the Swiss economist Simondi de Sismondi [Page 944](1773–1842). In his theoretical approach, the concept of underconsumption was of central relevance, as the question arose of what happens if the produced goods are not consumed. Following de Sismondi, industrialization and the resulting uncontrolled growth lead not only to a constant increment of production but also to an impoverishment of a constantly growing part of the working and consuming population (workers, artisans, and peasants) and to an increase in the number of unemployed. Consequently, de Sismondi radically questions the equation of unlimited growth and common wealth.

Karl Marx (1818–83) regarded de Sismondi to be the father of crisis theory. In his own theory of the connection between production and productive resources, Marx adopted de Sismondi's understanding of underconsumption. Marx recognized that the contradiction inherent in a capitalist system must inevitably lead to an economic crisis. Accordingly, the market is not regulated by an interplay of supply and demand alone but also by competition. The latter secures prices commensurate with production costs and maintain or raise the rate of profit (the “surplus value”) by keeping wages low or by decreasing them. Hence, general gluts can occur, caused by overproduction of goods and commodities. The result of this is that the working class continually gets poorer and is less able to consume.

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