I wrote:
> >B&S believed that the underlying tendency of a "monopoly" capitalist
> >economy was to sink toward what they saw as the normal state, a 1930s-type
> >depression. This ignores Marx's critique of an earlier generation of
> >underconsumptionists, i.e., that there is a strongly dynamic side to
> >capitalism.
Chris writes:
>While the stock exchanges of the capitalist heartlands continue to rise, we
>should not forget that the world economy as a whole is stuck at a level far
>below its productive potential. A couple of years ago the ILO argued that
>30% of the world's population is either unemployed or underemployed.
>
>In that sense the global economy is stuck in a depression even while the
>favoured parts of it are booming.
thanks for giving me a chance to blow my own horn, Chris. (Of course, you
know me: I'd blow it anyway.)
Though many "orthodox" Marxists simply dismiss underconsumptionism as
somehow being heresy, I think that this is an invalid generalization of
Marx's valid critiques of what I called "an earlier generation of
underconsumptionists" above and the similar critiques of Baran & Sweezy.
Just because old underconsumption theorists serious made mistakes doesn't
mean that their theory is totally and utterly wrong. The
underconsumptionists lacked a theory of why investment doesn't rise to fill
the gap formed by falling consumption. For example, Baran (in THE POLITICAL
ECONOMY OF GROWTH) argued that the "monopoly capitalist" economy is so
monopolized that the firms conspire to limit investment to avoid spoiling
monopoly profits (but somehow miss the macro-stagnationist effect of this
conspiracy). This argument seems extremely quaint in the current
competitive environment and was unrealistic even in the situation that
Baran was trying to describe.
Instead of such, I argue that if corporate debt, excess capacity, and/or
pessimistic expectations (or more likely a combination of the three) is
extreme, then businesses will not invest. Instead, their aggressive
profit-seeking turns to wage-cutting (and stretch-out and speed-up), which
raises the gap between wages and labor productivity and thus (ignoring the
role of consumer credit) the gap between consumption and production. The
resulting fall in profit realization simply makes the capitalists try
harder to restore profitability via wage cuts -- despite the
macro-depressive results of these efforts. I term this the
"underconsumption trap," which in practice coincides with Fisher's debt
deflation. (Years ago, Bob Brenner called this situation a "double bind"
for capitalists. He's dropped this from his current theory.) BTW,
introducing consumer credit into the story simply delays the problem, while
making it worse in the end as consumers are saddled with debt and the
Fisher debt-deflation scenario is intensified.
Thus, my theory of crises includes underconsumption as a possible result
under specific historical conditions, a situation in which we find the
world at this time, i.e., the "race to the bottom" in which the mobility of
capital, the IMF, the World Bank, outstanding debt loads,and the US
encourage larger and larger numbers of countries to compete with each other
to offer wage-labor at low wages (and low environmental standards) while
also promoting exports. On a small scale, this led to the
overaccumulation-underconsumption crisis that hit East Asia a few years ago
(involving aggressive competition over inelastic demand for their products
from the rich countries). Now many countries find themselves in a situation
of "competitive austerity" which encourages the underconsumption trap.
It's quite possible for a country like the US to expand for quite awhile in
a world economy in which most countries are stagnant, as it did in the
1920s and the 1990s. The expansion can be powered by capitalist investment
(led by expectations of future profits based on current high
profitability), rich folks' luxury spending (based on treating the high
stock market as a permanent feature of life), and/or working-class
consumption (based on consumer credit). (In the current situation, as in
the 1920s, net exports and government spending aren't doing the trick.) The
problem with this process is that capitalist investment is notoriously
unstable and creates new capacity that requires new increases in aggregate
demand and that consumer purchases based on credit leads to increasing debt
loads. The longer the boom is, the worse these problems will be. This
pile-up of imbalances makes the possibility of an underconsumption
trap/Fisher debt-deflation rise.
For more on this see: http://clawww.lmu.edu/~JDevine/depr/D0.html (long
version) and http://clawww.lmu.edu/~JDevine/depr/nushortdepr.html (short
version).
Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~jdevine
