Question

Did Karl Marx think that there were gluts or disequilibrium? Explain.

Answer 1

Economists like Karl Marx rejected the assumption that exchange was essentially equivalent to barter, by pointing out that money separates the acts of buying and selling and thereby makes crises possible. But this is only an abstract possibility. At the time, most authors believed that the factors turning this possibility into an actuality were linked to credit and speculation. Later, processes like hoarding, liquidation, and repayment of loans were added.

Marx’s theory of crises was the starting point of a number of overproduction approaches. His reproduction schemes showed that while harmonious growth is a logical possibility, it is not a necessity. One of the points on which Marx insisted was that advances in technology and organization imply an increase in productivity, and therefore diminish the value of wage-goods. If, in the short term, workers obtain increases in their real wages, the profit rate decreases below what capitalists considered customary, and production has to be stopped.

Hence he did believe in gluts.