Re: Re: Re: Stupid profit rate question

[Rakesh Bhandari]

Title: Re: [PEN-L:20537] Re: Re: Stupid profit rate question

Bill wrote

On Monday, December 10, 2001 at 17:31:20 (-0800) Michael Perelman writes:
>Bill, turnover rates are an important factor.  If a supermarket sells a
>loaf of bread each day.  The bread costs $1 and it sells for $1.01.  But
>it makes $3.65 per year on the bread.

I guess I should say that what I'm interested in is a measure of which

markets are good candidates for public investment.

Though Mattick Sr was interested in a different facet of so called public investments,  I thought that I would mention his argument that debt or tax financed public expenditures are not in fact *investments* (that is, a moment in the valorization of capital) but rather hidden state appropriations that over time diminish, rather than enlargen, the sum of surplus value.

Here are a couple of quotes:

        "The government increases effective demand through purchases from private industry, either financed with tax money or by borrowings on the capital market. In so far as it finances its expenditures with tax money, it merely transfers money made in the private sector to the public sector, which may change the character of production to some extent but does not necessarily enlarge it. If the government borrows money in the capital market, it can increase production through its purchases. Capital exists either in liquid form, i.e. as money, or in fixed form, that is, as means and materials of production. The money borrowed by government puts productive resources to work. These resources are private property, which, in order to function as capital, must be reproduced and enlarged. Depreciation charges and profits gained in the course of government-contracted production--are 'realized' out of money borrowed by the government. but this money, too, is private property--on loan to the government at a certain rate of interest. Production is thus increased, the expense of which piles U.S. as government indebtedness.

        "To pay off its debts and the interest on them, the government has to use

tax money, or make new borrowings. The expense of additional, government
contracted production thus carried by private capital, even though it is
distributed over the whole of society and over a long period of time. In
other words, the products which the government 'purchases' are not really
purchased, but given to the government free, for the government has nothing to give in return but its credit standing, which in turn has no other base than the government taxing power and its ability to increase the supply of credit money.
       

"We will not enter here into the intricacies of this rather complex process, for, however, the credit expansion is brought about and however it is dealt with in the course of expanding government-induced production, one thing is clear, namely, that the national debt, and the interest on it, cannot be honored save as a reduction of current and future income generated in the private sector of the economy...

       

"Because government induced production is itself a sign of a declining rate of capital formation in the traditional sense, it cannot be expected to serve as the vehicle of private capital expansion effective enough to assure conditions of full employment and general prosperity. It rather turns into an obstacle into such expansion, as the demands of government on the economy, and old and new claims on the government, divert an increasing part of the newly produced profit from its capitalization to private account.
         

"Of course, claims on the government, which make up the national debt,   can be repudiated, and 'profits' made via government induced production   are thus revealed for they actually are, namely, imaginary profits. "

Mattick also wrote:    

"The money capital utilized by the government is not invested as capital and so preserved but disappears into ěpublic consumption.î If the state debt is ever paid off--which may well not happen--it can only be paid out of new surplus value freshly created in production. And this would in no way alter the fact that the surplus value represented in the national debt has vanished without a trace instead of adding its volume to the accumulation of capital. It follows that the stateís use of increased public spending to fight crisis ends by consuming capital. This consumption of capital appears as a growth of production and employment, but due to its unprofitable character, it is no longer capitalist production and really amounts to a hidden form of expropriation by the state. The state uses the money of one group of capitalists to buy the production of another group, with the intention of satisfying both groups by assuring for one the interest on and for the other the profitability of its capital. But the incomes that appear here as interest and profit can only be paid out of the total social surplus value actually produced, even if the reckoning can be deferred. As a result, from the standpoint of the system as a whole the proceeds of state-induced production must count as a deduction from the total profit and therefore as a diminution of the surplus value needed for accumulation. Since the crisis results from a shortage of surplus value, it can hardly be overcome by increasing this shortage. "

Rakesh