Michael wrote, in explaining why high profit rates may mean falling real
investment:
>High profit rates translate into a rapid payback period. Long-lived
>capital goods, say, a railroad line cannot repay themselves very quickly.
but on the macroeconomic level, we're talking about a variety of different
projects, some with rapid payback and others with slow payback. (Even for a
specific corporation, this is often true, since corporations diversify.
Even a company that specializes in long-term projects will have some
long-term projects that it started years ago that are paying off now.) If
the profit rate is high as an aggregate average, that suggests that each
type of project is more likely to be profitable now than when profit rates
are low.
I don't think the profit rate was high in 1998 because of rapid payback,
but because wages were low relative to productivity (high rate of
surplus-value) and because the output/capital ratio was high. If we're
talking about the after-tax rate, then the tax system has helped boost
profit rates.
If the aggregate average profit rate is high, that means high cash flow
relative to invested capital and thus more deposits by companies into the
financial system. It also encourages optimistic expectations about future
profitability. This suggests that all else equal, if the realized rate of
profit rises for the economy as a whole, so does the rate of investment in
new projects.
Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~jdevine
