At 08:37 15/02/00 -0800, Jim Devine wrote:
>thanks for giving me a chance to blow my own horn, Chris. (Of course, you
>know me: I'd blow it anyway.)
Quite unintentional! I just thought it was an interesting point!
>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.
It is rare that a viewpoint is totally and utterly wrong. It is usually
partial or one sided.
>The
>underconsumptionists lacked a theory of why investment doesn't rise to fill
>the gap formed by falling consumption.
My own speculations come from several intertwining strands:
1) the striking extent to which the marxist description of the business
cycle looks like a limit cycle.
2) comparison with ideas in chaos theory, particularly Robert May's model
of the fluctuating population of a fish pond or lake (see chapter 3 of
Chaos by James Gleick)
3) the sense in which the business cycle seemed to bounce up against a
glass ceiling whatever the numberical values of the currency.
4) a demonstration by Ormerod that the unemployment rate seemed to circle
around a "strange attractor" in certain European economies but that had
shifted to a higher rate of unemployment in more recent years.
5) that marxist and Keynesian models of economics both assume that the
economy may not as a norm run at full capacity most of the time.
The explanation you criticise seems somehow mechanical as if the economy
were static and that capitalists could decide to transfer or not to
transfer a portion of the total exchange value of the society from
consumption to profit. The merit of your type of explanation appears to me
that it is non-linear ie it is dynamic, it is a process of different
patterns of circulation. In that dynamical process there are a number of
feedback decisions that may affect the total volume of the circulation up
or down. Marx is clear that in the making of any commodity for exchange
value the producers have to imagine as best they can what its likely chance
is of being reconverted back into money capital. They therefrore have to
guess the social use value of their commodity and its exchange value
relative to all other exchange values.
>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.
Thus under certain circumstances we could find the glass ceiling lowered
still further below the theoretical maximum capacity of the total economy.
>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.
I think the "race to the bottom" is a fine answer to the expression "flight
to quality". The "Flight to quality" during the Asian financial crisis was
a loss of nerve in the productivity of say one quarter of the world's
population, with a monetary crisis leading to a crash in the total volume
of means of production in circulation. The imperialist heartlands have come
out relatively stronger in what has been in practical terms a smaller
fishpond.
>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).
I have referred to some concepts from chaos theory and limit cycles.
However I think some of the traditional marxist concepts are also valid and
are worth thinking about. The precise formulation is important and
debatable. There is not just one contradiction. There is a problem of how
they nest one within the other and how one becomes more apparent or more
dominant in some situations and another in others.
1) The issue is not under-consumption in abstract but the contradiction
between the limited purchasing power of the masses and the need for capital
continually to accumulate. "the consuming power of the society... is not
determined by the absolute productive power nor by the absolute consuming
power of society, but by the consuming power based on antagonistic
conditions of distribution which reduces the consumption of the great mass
of the population to a variable minimum within more or less narrow limits."
(Capital Vol III p244)
2) "The contradiction between the social character of production and the
capitalist form of appropriation, which forms the chief cause of the
crises, expresses itself in the conflict between production and
consumption, capitalism endows the contradiction between production and
consumption, which also existed in pre-capitalist societies, a new and
peculiar character as a contradiction between labour and capital. The
crisis finds its expression in the colossal intensification of this
contradiction in the sharp disparity between production and consumption."
(From CPGB Study Course in Political Economy 1932-3)
3) What Marx called the absolute general law of capitalist accumulation
(Capital Vol I Chapter 25 Section 4 is that the greater the functioning
capital, the greater is the reserve army. Clearly this is no longer the
case within one country. But it may well be the case on a global scale. The
greater the mass of capital accumulated in the imperialist heartlands, the
greater the mass of working people in other parts of the world on the verge
of starvation or certainly unable to reproduce themselves in anything like
the way that the workers of the imperialist countries would expect to
reproduce themselves. I am not sure if this is all summed up in the term
"uneven development" but I do agree uneven development is part of it.
We shall see. But just perhaps this boom in the USA and its close
associates is no bubble. It is just the other side of the absolute general
law of capitalist accumulation. It can explain how there is both boom and
underconsumption on a massive scale globally.
The set point of the global system needs to be re-set, but that presumes it
can be brought under conscious human control.... And does humanity have the
tools to solve this task yet?
Chris Burford
London
