This is a response to Paul's post of ten days ago (Nov. 13) on recent
trends of the rate of profit in the US economy (see below). Paul, thanks
for your post and sorry for my delay in responding. It is a busy time of
the semester, and I had to find some time to take a look at Wolff's paper.
In a 1997 paper in the RRPE ("The Rate of Profit and the Future of
Capitalism"), I updated my estimates of the rate of profit and its Marxian
determinants through 1994. According to these estimates, the rate of
profit had recovered less than half of its prior decline, and thus
remained approximately 30% below its early postwar peak. (This paper is
available on my website: www.mtholyoke.edu/~fmoseley.)
Wolff's estimates end in 1997, which was a cyclical peak, and thus
exaggerate the increase. The rate of profit declined sharply between 1997
and 2001-02 (as we have discussed on pen-l). There has been some rebound
this year, but my guess is that the rate of profit today is no higher than
it was in 1994, and is probably somewhat lower. There are probably some
further differences between Wolff's estimates and my estimates, but I
would have to study them more carefully. Comparison is difficult because
Wolff's estimates are not annual, but only for 5 years between 1947 and
1997 (1947, 1957, 1966, 1979, and 1997), because his estimates are based
on input-output tables, which do not exist for every year.
So I would say that the US economy is still not "out of the woods" so far
as the rate of profit is concerned. Therefore, in terms of the "strategic
importance of our assessment of the medium-term direction of the US
economy" that you mention, I think workers will continue to face strong
persistent attempts to restore the rate of profit - by wage cuts, pension
cuts, speed-up, moving to low-wage areas around the world, etc.. In other
words, the attacks on the living and working standards of US workers in
recent decades is not over and will continue. I think that is the nature
of the challenge that we face.
According to Marx's theory, one of the main reasons for the prior decline
of the rate of profit was a very significant increase in the ratio of
unproductive labor to productive labor (in addition to an increase in the
composition of capital). Furthermore, according to Marx's theory, the
main reason why the rate of profit has only partially recovered is that
the ratio of unproductive to productive labor has continued to increase
since the 1970s, and thus partially offset the very large increase in the
rate of surplus-value and a small decline in the composition of capital.
I would be happy to try to answer any further questions, if you wish.
Fred
On Thu, 13 Nov 2003, Paul wrote:
> Date: Thu, 13 Nov 2003 13:50:21 -0500
> From: Paul <[EMAIL PROTECTED]>
> Reply-To: PEN-L list <[EMAIL PROTECTED]>
> To: [EMAIL PROTECTED]
> Subject: Rates of profit: a recent article
>
> A useful article on U.S. profit rates, from a marxian perspective, has been
> published recently by Ed Wolff ("What's behind the rise in profitability in
> the US in the 1980's and 1990's?" in the July issue of the Cambridge
> Journal of Economics vol 27; write me off list for those needing an e-version).
>
> 1) To my knowledge, this is only the second (!) published article that
> provides a marxian perspective on the 'big picture' of the US
> economy\profit rates since the 1950's AND assesses the last 10-20 years in
> that context. In January, we briefly discussed this issue and I drew
> attention to the other article by Dumenil and Levy in the RRPE. There is
> also the (unpublished?) useful pamphlet by Jim Devine (
> http://bellarmine.lmu.edu/~jdevine/talks/newOhio.htm ) and very good
> earlier work by Shaikh and Tonak, Mosely, and a very few others. In fact,
> many of the key authors, on this key subject, subscribe to Pen-l. Jim
> Devine is thanked as an ASSA commentator to the paper (comments
> Jim?). Anyone aware of any other recent articles?
>
> 2) Three points struck me about the Wolff article:
>
> - Using somewhat different methods than D & L, the Wolff article confirms
> the view of early '80s to '97 as a period of rising rate of profit - weak
> and perhaps atypical of other periods but still rising. Wolff is cautious
> not to draw large conclusions (as were D & L), but his breakdown of the
> factors that contributed to the profit rise are long term and 'structural'
> in nature. It seems to me that a context of rising profits (unless you
> believe it is over) will have strategic importance to our assessments of
> the medium term directions of the US economy - and the types of challenges
> we will face.
>
> - Wolff also concurs with D & L that one major cause of the profit rise was
> a shift in shares away from labor and to profit. [Fred Mosely may have some
> comments about this.] Both articles attribute labor's loss to real wage
> gains lagging behind productivity gains. Wolff points out that consumer
> good prices rose faster than the GDI inflator; without this effect profit
> gains would have been wiped out. He says this may reflect larger
> productivity gains in the capital goods and export goods sector.
>
> - Wolff emphasizes the impact of changes in the sectoral composition of
> production and employment. He tracks the shifts from sectors of high
> Capital\Labor ratios and high Organic Compositions of Capital to sectors of
> low ratios (moving to more profitable sectors). For Wolf, this shift in
> employment to labor intensive sectors is the other main cause of the rise
> in the profit rate in the current period. Because of shifts towards
> investing in sectors with low organic composition of capital (and also
> because of increases in labor productivity in producing capital, and
> recently the relative cheapening of capital), Wolff does not find a
> significant change in the organic composition of capital for the economy as
> a whole over the last 50 years (i.e. no rising rate of OCC; tendency for a
> falling rate of profit).
>
> 3) To my recollection, the D & L article and the Wolf article each tend to
> track with the orientation of their previous work. D & L tend towards
> finding strong effects at the level of productivity of capital and the
> OCC. This also lends itself to long wave theory. Wolf has tended more
> towards finding "profit squeeze" effects (now "capital squeeze" ?) and has
> tended to discount any tendency towards rising OCC's\falling rates of
> profit (that then meet their offsetting tendencies).
>
> Whichever one "prefers", I found it useful to read both articles as
> companions. I would be grateful to hear comments or insight for anyone on
> the list.
>
> Paul
>
