"Contractual' Savings and Underconsumption : Realization Problems of British Capitalism in the Recession

This paper examines the possibility of an underconsumptionist tendency operating in the British economy in the recent recession as a result of (i) increases in contractual savings resulting in an increasing private savings-income ratio as a result of the lack of perfect substitutability between contractual and discretionary savings ; (ii) a posited link between consumption and investment, either direct or indirect via the effects of falling consumption on capacity utilization and the rate of profit. Comparisions are made between our version and Baran and Sweezy's theory of underconsumption. Some temporal, spatial and theoretical limitations of our approach are also examined.