Simonde de Sismondi -Overproduction

Jean Charles Leonard Simonde de Sismondi

Overproduction and Machinery

Sismondi's whole scheme of distribution is underlain by an "unorthodox" belief as to the possibility of general overproduction, which militated against the success of his work. He argues that if the annual production were in excess of the annual revenue, which seemed to him quite possible, overproduction would be the result. Capital would then suffer loss, labor would go unemployed, and thus the consumers' gains through lower prices would be but temporary.

In reality, there seem to have been two different notions of overproduction in Sismondi's mind: one concerned "use values" or total utility; the other, exchange values. It is not unlikely that he was confused in dealing with the two. His reasoning upon the former notion, which to him is the fundamental one, Sismondi appears to have based upon the need for "repose." He states that repose, or rest, is a "natural" taste of man. It is the reward of labor. Man accumulates only to consume, which implies repose. But under the dominant system, laborers must work on, making a superabundance of products, many of which are luxuries. Their efforts are thus separated from their reward.

That a line drawn between necessities and luxuries, is also an essential part of Sismondi's reasoning here, is clear; for it is only for luxuries that man's wants are unlimited, and it is in multi­plying goods beyond needs that overproduction lies. In a word, if men would satisfy their needs only, including the need of re­pose, the unremitting labor of the day would not be required. If the truth of his semi-ethical idea of necessities and luxuries be granted, as well as the statement that laborers are over­worked, there is nothing inherently fallacious in the reasoning so far.

It is on the point of overproduction of exchange values that Sismondi falls into positive error. Here his whole idea is that an increased demand must precede increased production, and his criticism of the economists has already been referred to. He fails to see that, in the long run, production and revenue are interdependent; that production is the source of revenue; that it indirectly creates and directly limits "demand." He fails to see the significance of the fact that exchange values are relative, and that as a general proposition their total amount cannot be affected by changes in the total production of all commodities. Hence, he is led to uphold the possibility of a universal glut or general overproduction. Indeed, he states that at the time he wrote such a condition prevailed and had been in existence several years.

While he calls attention to important truths, Sismondi's over­sights and fallacies on this point are many. He fails to see the difference between consumption and "demand," or at least does not understand the significance of this difference; for he does not allow for the fact that consumers must produce before their wants can become "effective." He generalizes too hastily from overproduction in particular industries. He illogically breaks into the round of production and consumption, and assumes revenue and demand almost as if they were something absolute this being accentuated by his constant separation of the opera­tions of one year from those of another, thus artificially chopping industrial life into segments. He ignores the decrease in costs which frequently attends increased production, in this assuming a loss to capital and decreased employment, whereas decreased expenses of production would permit equal net earnings and increased employment. He, in his pessimism, does not consider facts as to increased consumption or as to its greater variety. And, finally, as a criticism of the Bicardian school, his arguments are weakened by not making due allowance for their assump­tions as to length of time, mobility, and economic motive.

But his truths are not to be forgotten. He justly criticized the economists for reasoning so abstractly as to overlook the delay and friction often involved in bringing supply and demand into equilibrium. To this element of friction, Sismondi constantly points. And not only is there the immediate lack of equilibrium; it is increased, and its evils are heightened, by the fact that laborers frequently must remain at work though wages are lowered and hours increased. The force of habit, and the tech­nical difficulties of transferring fixed capital, are brought into clear relief.

Sismondi attacked the prevailing idea that machinery is an unmixed good. Here again, though he goes too far, his criticism has its value. His real point is that invention and the introduc­tion of machinery are an unmixed benefit only when preceded by an increase in revenue and demand which would allow the employment elsewhere of the labor which is displaced; otherwise there is suffering through lower wages and unemployment. All of which, for a given time, is frequently too true. Sismondi, however, would have restricted the adoption of machinery; while the economists, when they did not treat the question in such an abstract and general manner as to sail above it, would have resorted to some system of relief pending new adjust­ments.