Capitalism has an inherent tendency to expand the productive capacity of consumer goods faster than the demand for consumer goods. This is because of unsaleable stock of these goods which result from the full utilization of the productive capacity for them. And the existence of the idle productive capacity which is not utilized because its output would be unsold. Sweezy prove the under consumption based on Baur’s demonstration.

Total value = C + V + S

Sweezy divided SV in to

S = Sc + ∆Sc + ∆V + ∆C

S = total SV

Sc = constant capitalist consumption

∆Sc = increase in capitalist consumption

∆V = increase in variable capital for workers consumption

∆C = increase in constant capital

Then ∆C + ∆V = total accumulation, part of accumulation (∆V) is consumed, while ∆C is invested.

The objectives of accumulation met in two ways

  1. Maximization of SV or profit
  2. Maximization of accumulation from profit.

This implies that accumulation rises as a percentage of sv and investment also rises a percentage of accumulation.

Sweezy states that, The rate of change of capitalist consumption ∆Sc/Sc is a falling percentage of SV. The rate of investment of wages ∆V/V is a falling percentage of total accumulation This implies that, the rate of increase of total consumption [∆(Sc + V) / (Sc + V)] falls relative to the rate of increase of means of production (∆C / C). Thus according to Sweezy, “the ratio of the rate of growth consumption to the rate of growth of the means of production will decline” The chain of causation of crisis- ratio of rate of growth of output of consumer goods to rate of growth of means of production is constant → leads to an inherent tendency of consumption lag behind supply. Therefore, under consumption or over production.

Other notable contributors of under consumption theories are Rosa Luxumburg, Henryk Grossman, Lenin and Bukharin. Luxumburg tried to show that capitalist accumulation was constrained by inadequate demand which warranted the exploration of non capitalist markets.