Can Capitalism Exist Without Excess?

EVERYONE RECALLS THE SHORTAGES of toilet paper and pasta, but the early period of the pandemic was also a time of gluts. With restaurants and school cafeterias shuttered, farmers in Florida destroyed millions of pounds of tomatoes, cabbages, and green beans. After meatpacking plants began closing, farmers in Minnesota and Iowa euthanized hundreds of thousands of hogs to avoid overcrowding. Across the country, from Ohio to California, dairies poured out millions of gallons of milk and poultry farms smashed millions of eggs.

The supply chain disruptions continue. Last year, there was a rice glut, and big box stores like Walmart and Target complained of bloated inventories. There was a natural gas glut in both Europe and in India, as well as a surfeit of semiconductor chips in the tech sector. Florida cabbages, microchips, and Asian rice may not seem like they have much in common, but each of these stories represents a fundamental if disavowed aspect of capitalism: a crisis of overproduction.

All economic systems have problems of scarcity, but only capitalism also has problems of abundance. The reason is simple: the pursuit of profit above all else leads capitalism to produce too much of things that are profitable but socially destructive (oil, private health insurance, Facebook) and not enough of things that are socially beneficial but not privately profitable (low-income housing, public schools, the ecosystem of the Amazon rainforest). For over a century, from the Industrial Revolution through the Great Depression, crises of overproduction were the target of criticism from across the political spectrum—from aristocratic conservatives like Edmund Burke who feared the anarchy of markets was corroding the social order to socialist radicals like Eugene Debs who thought it generated exploitation and poverty.

But the idea of capitalism’s inherent predilection for overproduction has almost completely disappeared from economic discourse today. It seldom appears in the popular press, including in stories about producers destroying surpluses, a problem that is instead explained away by pointing to freak accidents, contingencies, and unforeseen dislocations. To be sure, many gluts of the past few years have been the result of the pandemic and the war in Ukraine. But overproduction preceded 2020 and shows no signs of going away. Revisiting historical arguments about the problem can help us better understand the interlocking crises of supply chain disruption, deliquescent financial markets, and climate change. The history of overproduction and its discontents offers a set of tools and ideas with which to consider whether “market failures” like externalities and inventory surpluses really are exceptions or are intrinsic to commercial society, whether markets ever actually do equilibrate, and whether the drive for growth is possible without continual excess and waste. 

The early phases of commercial and mercantile capitalism were riddled with commodity gluts. These localized episodes of oversupply were the result of long lags in communications and trade, as well as very thin and isolated markets. For instance, if, in the early seventeenth century, two ships, unknown to each other, departed from England with cargos of copper and arrived in the Jamestown colony four months later, they would deliver far more of the metal than the few thousand surviving colonists could possibly use. Having already paid for the copper at home and unable to sell part of it, the merchants would likely go bankrupt, which in turn could ruin their creditors.

There really was a copper glut of this kind in Jamestown between 1610 and 1620. The broad Atlantic trading zone over the following decades was variously overwhelmed by whale oil and beaver fur, Malaccan tin and Indian textiles, as well as spices and pepper, the last of which led the Dutch East India Company to burn their excess supplies. In the 1670s there was an excess of paintings in the Dutch art market. There was a surplus of Chinese green tea in London in 1732, and Chesapeake tobacco in Scotland in the 1770s. An overabundance of tea plagued Philadelphia throughout the 1730s and 1750s. In 1773, the English East India Company was faced with another tea glut, in response to which Parliament forced the American colonies to buy the excess, a move that culminated in the Boston Tea Party.

In short, commodity gluts happened all the time. Like the weather and toothaches, they were a staple topic of discussion in eighteenth century merchant correspondence. More significantly, these gluts stimulated some of the first critical arguments about capitalism. Some eighteenth-century thinkers, like the Anglo-Dutch philosopher Bernard Mandeville and the Irish banker Richard Cantillon, said that markets were self-regulating and self-organizing, and that crises only happened when misguided policymakers meddled with the system. Others, like the French bureaucrat François Forbonnais and the Italian economist Antonio Genovesi, countered that markets, though beneficial, could not function without governance and guidance because these recurrent gluts showed that production for sale and profit was inherently chaotic. These abstract arguments were immediately politicized in fights over tariffs, monopolies, and free trade.