On Thu, 12 Mar 1998, Mark Jones wrote:
> Here are the figures on commercial bank profitability, from the IMF 1997
> report, International Capital Markets Developments, Prospects, and Key
> Policy Issues (supplementary tables), which demonstrates the adverse
> turn in the fortunes of Germany and Japan v. the Anglo-Saxon world. Not
> much signs of hyperaccumulation here (and the opaque German and Japanese
> figures are probably over-optimistic).
[IMF statistics showing that Canadian banks were far more profitable from
1990-1994 than US banks, which in turn were more profitable than German or
Japanese banks]
You're making the classic rentier mistake of confusing short-term
profitability (the accumulation of finance capital) versus long-term
profitability (market share). The whole point of my argument is that
the banking system of the Central European and East Asian metropoles
(let's call 'em, for sake of brevity, the CEM and the EAM) is basically
designed to funnel capital to industry, and not primarily to make
super-profits off of stock market bubbles. The result is that CEM/EAM bank
profitability is indeed lower on average, the total volume of lending is
higher, because the money which would've gone into the pockets of
shareholders ends up being reinvested in low-interest loans to
corporations. The same is true for industrial strategy, by the way --
Japanese car companies didn't make a dime for years on many of their
American transplants; rather, the point was to make a long-term investment
in the global car market, regardless of profitability considerations. This
is why EAM/CEM firms are, on average, far more leveraged than their
American counterparts: the interest burden on the extra debt is quite low,
so there's no problem paying these off, and the interest gets funneled
straight back to new investments anyway.
All this feeds back into the culture of finance capital -- since there are
very few businesses out there which generate the 15% return on equity
demanded by Wall Street these days, what you get in the US (as well as
the UK and Canada) is a banking system designed to concentrate what growth
there is into the portfolios of the superrich (investment, on the other
hand, as Doug's excellent "Wall Street" points out in some detail, is
mostly self-financed instead of bank-financed). The EAM/CEM systems are
designed, however, to redistribute the social surplus back to the
productive economy. So you have a situation where the German banking
system has doubled in size from 1990 to 1996, precisely where the American
stock market doubled in size during the same period. Both are
speculative claims on future assets, of course, but only the German
system has something to do with the real economy; the Wall Street bubble,
on the other hand, is a stupendous disaster in the making, which will
undoubtedly require a humongous Government bailout (financed by our old
friend, the real economy) of some sort during the next recession.
Wasn't it Adam Smith who first noted that excessive profits were a sign of
economic decadence, whereas rising economies showed lower profits but
grew faster, precisely because they were forced to adopt labor-saving
innovations sooner? Or am I mixing up my classicists here?
-- Dennis
