Introduction

Underconsumption theories maintain that capitalist accumulation has an inner tendency to make demand permanently fall short of the increase in production. According to Michael Bleaney (1976), we cannot speak about an underconsumption view before the nineteenth century, because only Adam Smith separated consumption and investment expenses. Bleaney is partially right, but things are more complex. Such a separation already existed in the writings of other Enlightenment authors (see Perrotta, 2004, chap. 11), and more clearly in the physiocrats, who wanted a right balance between consumption and investment expenses. However, Francois Quesnay—like Pierre le Pesant de Boisguilbert and Richard Cantillon before him—still saw investment, exchange and circulation as depending on landlords’ consumption. What he lacked was the idea of accumulation as a steady growth of investments and profits in all sectors. It was only Smith who introduced this concept by opposing—rather than just distinguishing—unproductive consumption and investment. This changed political economy as a whole.

Later, Smith's hostility to unproductive consumption and his unconditional support of investment raised doubts among underconsumption economists. But only a few, like William Spence, tried to revive the physiocratic approach (see below). On the contrary, Smithian followers criticized the physiocrats on this issue. J. B. Say ironically wrote, “Many people […] have imagined that to encourage consumption means fostering production. The Economists [the Physiocrats] seized this idea and made it one of the main principles of their doctrine.”1 Even more sarcastic was James Mill (1808, 75– 80) when criticizing Spence and the physiocrats for defending landlords’ consumption. Despite this, Jacob Hollander's (1928, lxxix– lxxx) idea of tracing back the underconsumption view to the physiocrats appears inappropriate.

However, Smith's commitment for saving drove to neglect the importance, for accumulation, of consumption increase, and of the consequent increase in skill. About productivity growth, Smith only relied on the opposite process: division of labor. The idea that accumulation only consisted in a growing division of labor led economists to uncritically accept the first industrial revolution, where mechanization was decreasing the need for skilled labor and was pushing wages down to the subsistence level.