Jim, The question we were discussing, I thought, was what explains the drop in profits after 1997 (despite rapidly rising labour productivity) and which subsequently resulted in a fall in investment initiating the recession. Your data, at least as I read it, questioned whether the fall in profits was initiated in production given the stable K/Y ratio. Underconsumption was discounted because, as many have noted, consumption expenditure has held up despite the drop in consumer confidence. How then to explain the decline in profits if real wages were not rising faster than labour productivity unless one were to suggest that the intensity of labour was being reduced.
My question was really quite simple -- could not the fall in profits been because of a form of inability to realize profits (surplus value) caused by competition from offshore (as claimed by CEOs to explain why inflation was held in check despite falling unemployment -- i.e. in their terms, a leftward shift in the NAIRU), competition that was fueled by a) overaccumulation in competing countries, in particular China; and b) the steady rise in the value of the USD which forced down prices of domestic production in order to remain competitive. (ps. the references to scripture, etc. were not referring to you.) Paul Phillips, Economics, University of Manitoba Economics, University of Manitoba
