Tugan-Baranowsky and Effective Demand

Abstract

Tugan-Baranowsky criticized underconsuption cri- sis theories on the basis of Marx's reproduction schemes in Vol. II of Capital. However, he incorporated in his analysis the absolute immiseration thesis, and claimed that proportional- ity between production sectors would exclude any possibility of crisis, despite the supposedly continuous fall in mass consump- tion. This approach allows for a Keynesian interpretation of Marx's theory of expanded reproduction of social capital, accord- ing to which a constantly increasing investment may always compensate for the lacking for consumer goods. In contrast to Keynesian approaches, the ultimate cause of an economic crisis is found to be not lack of demand but lack of surplus value, in the sense that the totality of capitalist contra- dictions renders capital unable to exploit labor at the level of exploitation that is required for sustaining profitability rates.