Let us follow the shoe manufacturer of your city. He has no way of knowing, as I have already pointed out, who will or will not be able to buy his shoes. He makes a rough guess, he ‘estimates’, and he decides to manufacture, let us say, 50,000 pairs. Then he puts his product on the market. That is, the wholesaler, the jobber, and the storekeeper put them up for sale.

Suppose only 30,000 pairs were sold; 20,000 pairs remain on hand. Our manufacturer, unable to sell the balance in his own city, will try to dispose of it, in some other part of the country. But the shoe manufacturers there have also had the same experience. They also can’t sell all they have produced. The supply of shoes is greater than the demand for them, they tell you. They have to cut down production. That means the discharge of some of their employees, thus increasing the army of the unemployed.

‘Over-production’ this is called. But in truth it is not over-production at all. It is under-consumption, because there are many people who need new shoes, but they can’t afford to buy them.

The result? The warehouses are stocked with the shoes the people want but cannot buy, shops and factories close because of the ‘oversupply’. The same things happen in other industries. You are told that there is a ‘crisis’ and your wages must be reduced.

Your wages are cut; you are put on part time or you lose your work altogether. Thousands of men and women are thrown out of employment in that manner. Their wages stop and they cannot buy the food and other things they need. Are those things not to be had? No, on the contrary; the warehouses and stores are filled with them, there is too much of them there’s ‘over-production’.

So the capitalist system of production for profit results in this crazy situation:

1. people have to starve — not because there is not enough food but because there is too much of it; they have to do without the things they need, because there is too much of those things on hand;

2. because there is too much, manufacture is cut down, throwing thousands out of work;

3. being out of work and therefore not earning, those thousands lose their buying capacity. The grocer, the butcher, the tailor all suffer, as a result. That means increased unemployment all around, the crisis gets worse.

Under capitalism this happens in every industry.

Source