Charles Brown wrote: >> Do you think this fundamental problem can be solved through reforms ? <<
Fred writes: > Charles, thanks for the clarity of your question. >The short answer to your question is no, there is no reform - that I know of - that will solve the fundamental problem of insufficient profitability. According to Marx's theory, what is needed is one or more of the following: a devaluation of capital (through bankruptcies, write-offs, etc.), lower wages, and/or a reduction of unproductive labor. Marx emphasized the former. < yes, those are important, but it should be noted bankruptcies and write-offs don't help the aggregate rate of profit unless the excessive capital equipment is scrapped; a bankruptcy can simply redistribute the ownership of existing capital equipment. Lowering wages can make realization crises worse, especially given the consumer debt load and rising unemployment rates these days. (There's no way consumer spending is going to hold up if unemployment rises to 6.5%) The ouster of unproductive workers -- i.e., one kind of lay-off -- also has this effect, as does the speed-up of the aggregate growth of labor productivity (output/(productive + unproductive labor)) that would result. Realization problems are made worse if productivity rises relative to wages. BTW, why aren't these "reforms"? The neo-liberals promise that their "reforms" will abolish unproductive labor (as they define it). > So the reform that you seem to be most interested in - higher wages - will not solve this problem. Rather, it will make this problem worse. It would be nice if Jim's theory of insufficient demand for consumer goods were true.< This is an excessively simple presentation of my theory. Among other things, as I've said before on pen-l, I don't think anyone can simply wish for higher wages and have their wish come true. BTW, in my theory the lack of conflict between capital and labor over wages (on a macro level) only applies in what I term an "underconsumption trap" and then only on the macro level. In that situation, business investment is blocked (by unused capacity, excessive debt, pessimistic expectations) and other sources of aggregate demand such as government deficits and positive net exports are ruled out. In this situation of low profits, individual capitalists try to pull the iron out of the fire by squeezing workers. But, given the blockage of other sources of aggregate demand, underconsumption forces apply directly, so that the profitability situation _gets worse_ as capacity utilization rates fall again. (There's micro/macro irrationality, of the sort that Marx referred to in the GRUNDRISSE, p. 420, Martin Nicholaus edition. It's also similar to the Keynesian paradox of thrift.) In this situation, and only in this situation, a mass effort to raise wages would force the capitalists to be more sane on the macro-level. However, they would fight it tooth and nail, because capitalists only truly understand micro-level rationality (i.e., the bottom line). >Then there would be no inherent conflict of interests in capitalist economies, and no necessary inverse relation between wages and profit, as Marx (and Ricardo) emphasized. It would then always be possible to achieve higher wages and living standards for workers with endangering profits. But, alas, I don't think this theory is true. The inverse relation between wages and profits becomes especially clear in times of recessions, like today. < The posited inverse relationship between real wages and profits assumes, among other things, something akin to Say's Law, i.e., that there are no realization crises. (Ricardo fell for this "Law," but Marx did not.) But if aggregate demand increases (for whatever reason) so that capacity utilization rates rise -- e.g., as in the early 1940s or the 1960s -- it's possible for both real wages and profitability to rise. Further, ignoring realization issues, rising labor productivity allows the real wage to rise without necessarily squeezing profit shares or the rate of surplus-value. In a recession, individual capitalists _think_ that there's an inverse relationship between wages and profits. That's why they push down wages (along with speeding up and stretching out work). But that's only a microeconomic perspective (infected with what Marx termed the "illusions created by competition" or "the fetishism of commodities"). On the macro-level, a rise in wages could prevent a fall in consumer demand, as explained above. Jim Devine
