MIA: Encyclopedia of Marxism: Glossary of Terms
Overproduction and Underconsumption
The term “over-production” is often used to describe that situation which initiates a period of capitalist crisis or recession, whereby too many goods have been produced, the goods cannot be sold, production grinds to a sudden halt, people lose their jobs, demand drops even further, and the downward cycle accelerates.
Over-production is a misnomer however, for in itself overproduction of goods is almost always a socially useful thing, easing the distribution problem and acting as an insurance against future disruption.
The real problem when goods lie on the shelves is that no-one can afford to buy the commodities; in other words “over-production” should really be called “under-consumption”.
In another sense however, the term “overproduction” is valid; but it is not goods and services which have been over-produced, but capital.
During a boom period – the rising phase of a capitalist crisis – profits run high and a mountain of fictitious capital is built-up by speculation and borrowing for unwarranted future expansion. All this fictitious capital has to be fed by the surplus extracted from workers and this grows to be more and more of a burden on the backs of the workers until profitability can no longer be maintained, and slump takes over.