Re: Estimating the surplus\Doug's question\Fred's comments
Paul, thanks for your comments. My responses below.
On Fri, 12 Dec 2003, Paul wrote:
Fred,
Very glad you could make it - you were missed! I want to think more about
your post but have one small and one larger reflection.
1. I think we can all agree on the big focus of profit rates, as Paul
put it - that the rate of profit is the most important variable in
analyzing capitalism. And I agree with Paul that this emphasis on profit
and the rate of profit is what distinguishes classical-Marxian theories
from neo-classical theories.
In addition to Doug's main point ('show me the benefit of all this'), Doug
does make me wonder whether my description of the Classical/Marxian
approach should have been more specific (although the change might prove
more narrow-minded). As you know well, historically, the Classical
tradition focused on profits/profit rate but broke this down into the
changes that emerge from the labor\capital shares AND the changes that
emerge from what I was calling the 'capital side' (with lots of differences
and inconsistencies among Classical authors). Of course, since Sraffa
there has been an intelligent and articulate revival of interest in
Classical presentations of the first issue (wage/profit frontiers, etc)
WITHOUT the capital side. The discussion with Doug illustrates a point:
without the 'capital side' just how useful is such a presentation? Doug
gave good examples of how similar arguments could be made sticking to a
Keyensian\Kaleckian tradition that is more accessible to most. (Of course
Doug is also skeptical of the value of this approach even with the capital
side, but that is a different discussion.)
I agree that the capital side (i.e. the composition of capital) is an
important determinant of the rate of profit. (I prefer to discuss this in
terms of Marx's concept of the composition of capital, rather than the
mainstream concept of the productivity of capital which I think is
misleading.) The increase in the composition of capital in the early
postwar period was an important cause of the decline of the rate of profit
in that period, and the decrease in the composition of capital in recent
decades has been the main cause of the partial recovery of the rate of
profit. So clearly, theory and analysis of the rate of profit should
include the composition of capital.
I also agree that this is an important distinguishing feature of Marx's
theory, in contrast to Ricardo's theory and Sraffa's theory and all other
economic theories, which if they consider the rate of profit at all,
generally consider only the share of profit and ignore the composition of
capital.
...
6. I have suggested another explanation of these important trends, one
based on Marx's distinction between productive labor and unproductive
labor - that an important cause of the declines in the share and the rate
of profit was a very significant increase in the ratio of unproductive
labor to productive labor. I am not sure that this is the correct
explanation of these trends, but I think it may be, and I think that it
worthwhile to at least consider what Marx's theory implies about the
causes of these trends and the likely prospects for the future.
And one important advantage that this theory has over the profit squeeze
explanation is that it provides a consistent explanation of why the share
and rate of profit have only partially recovered in recent decades, in
spite of the loss of workers' power and stagnant real wages - because the
ratio of unproductive to productive labor has continued to increase.
This theory also provides an important prediction about the future - that
if the ratio of unproductive to productive labor continues to increase (as
I expect), then the recovery of the share and rate of profit will continue
to be slow and partial, thus leading to more wage cuts, speed-up,
etc. According to this theory, the US economy is definitely NOT at the
beginning of another long-wave period of growth and prosperity, similar
to the early postwar period (with steady real wage increases). The only
partial recovery of the share and rate of profit makes such a return to
more prosperous conditions very unlikely.
You have made me think about what is the nature of a long wave
upturn. Here are some quick thoughts and concerns.
1. a. Of course these are waves, not cycles (as in Kondratieff,
investment-accelerator, etc). It is not even as if a simple mechanism such
as the falling of the price of capital in a downturn will, in
itself, produce an upturn.
b. The up and the down of these waves are not symmetrical. While
there are forces common and inherent in the accumulation process to
downturns (tendencies to a rising OCC, etc), the upturns require
exceptional events that are not inherently produced by the downturn
process. Mostly these require some combination of major technological
change AND socio-political
Re: Estimating the surplus\Doug's question
Hi Jim, thanks for your good questions. A few responses below. On Fri, 12 Dec 2003, Devine, James wrote: Hi, Fred. you write: 6. I have suggested another explanation of these important trends, one based on Marx's distinction between productive labor and unproductive labor - that an important cause of the declines in the share and the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. I am not sure that this is the correct explanation of these trends, but I think it may be, and I think that it worthwhile to at least consider what Marx's theory implies about the causes of these trends and the likely prospects for the future. And one important advantage that this theory has over the profit squeeze explanation is that it provides a consistent explanation of why the share and rate of profit have only partially recovered in recent decades, in spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. A big question: _why_ does the ratio of unproductive to productive labor increase over time? if this ratio is squeezing profits, it seems that profit-seeking capitalists would make an effort to lower it. or is there some sort of technological or social imperative that pushes capitalists to increase the ratio anyway? or is it a matter of it being good for capitalists as individuals to raise the ratio even though it's bad for capital as a whole? This is indeed a big and important question, and I think the answer is a combination of the types of things that you have suggested. I discuss this question at some length in Chapter 5 of my 1992 book (The Falling Rate of Profit in the Postwar US Economy). It is complicated because the category of unproductive labor is a mixed bag of different kinds of labor (circulation labor and supervisory labor and subgroups of each), and the increase of each of these different kinds of unproductive labor may be due to different causes. The main conclusion that I came to in this chapter is that the main cause of the increase of circulation labor (roughly two-thirds of the total) is that during this period the productivity of productive labor increased faster than the productivity of sales labor, thereby requiring a relative increase of the latter in order to sell the more rapidly increasing output of the former. The classic example is the auto industry. The quantity of autos produced per productive worker increases much more rapidly than the quantity of autos sold by salesperson (which remains a largely labor-intensive, person-to-person activity). An interesting corollary of this explanation is that the computer revolution has been one way to increase the productivity of unproductive labor, and therefore slow down the increase in the number of unproductive workers. Indeed, much of the computer revolution has been aimed at reducing unproductive labor (sales, accounting, debt-credit, etc.). Therefore, Marx's theory suggests that the rapid development of computer technology in recent decades has been due in part to the systematic imperative to reduce unproductive labor in order to restore the rate of profit. alternatively, it could be that the geographical unit of analysis is wrong. What if the US-based operations of capital are specializing in what Marxists term unproductive labor, while exporting the productive jobs to other countries? In that case, we should be calculating the world-wide rate of profit, no? Yes, I think the increasing geographical specialization of recent decades (productive labor in the rest of the world, unproductive labor in the US) is part of the explanation of the relative increase of unproductive labor in the US. This theory also provides an important prediction about the future - that if the ratio of unproductive to productive labor continues to increase (as I expect), then the recovery of the share and rate of profit will continue to be slow and partial, thus leading to more wage cuts, speed-up, etc. According to this theory, the US economy is definitely NOT at the beginning of another long-wave period of growth and prosperity, similar to the early postwar period (with steady real wage increases). The only partial recovery of the share and rate of profit makes such a return to more prosperous conditions very unlikely. why can't the ratio of unproductive to productive spending change quickly in the future? didn't something like that happen in the 1990s, lowering the ratio? One indicator of what happened can be seen in Michael Reich's 1998 article Are U.S. Corporations Top-Heavy? Managerial Ratios in Advanced Capitalist Countries (in the REVIEW OF RADICAL POLITICAL ECONOMICS, vol. 30, no. 3, 33-45). Reich's data on p. 37 show a rise in the management ratio until 1982 or so -- fitting with David Gordon's fat and
Re: Estimating the surplus\Doug's question
On Fri, 12 Dec 2003, paul phillips wrote: Devine, James wrote: Hi, Fred. you write: spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. A big question: _why_ does the ratio of unproductive to productive labor increase over time? if this ratio is squeezing profits, it seems that profit-seeking capitalists would make an effort to lower it. or is there some sort of technological or social imperative that pushes capitalists to increase the ratio anyway? or is it a matter of it being good for capitalists as individuals to raise the ratio even though it's bad for capital as a whole? why the ratio rises is important. For example, if we posit that demand-side stagnation has been the rule of late, that would push up the ratio (for a few years, at least) in that unproductive labor is typically overhead labor, while productive labor is laid off. However, this explanation doesn't fit the waves of downsizing (thinning out of management, etc.) that hit US business during the 1990s. (see below) Jim, I tried to offer one suggestion in my post a few days ago. In the 1970s, corporations attempted to restore the profit level through price increases (leading to a price-wage spiral) which was cut off by the recession of the 1980s. Since that time, we have been in a period of demand constraint. As a result, increasing productivity has been met by downsizing and wage restraint resulting in stagnant wages which leads, as you point out, to an underconsumption undertow. Major corporations respond to this demand constraint by increasing promotion, marketing and advertising thereby increasing the ratio of unproductive to productive labour. But given globalisation and Asian competition, firms can't raise prices to match the increased cost of unproductive labour. They respond by trying to cut managers, etc. In the 1990s, they were aided by technological change in white collar work (i.e. computerization) which reduced the relative demand for/employment of unproductive labour. (My figures for Canada indicate a significant decline in the employment of certain types of secretarial and clerical labour in the early 1990s.) But given the deflationary effect of global competition using low-wage 3rd world labour, 1st world corporations are unable to raise prices to restore (realized) profitability. Thus, the profit recovery in the 1990s was only partial in the light of continuing need to increase unproductive selling/marketing expenditures despite the rise in productive worker productivity. To the extent that the growth in non-productive worker productivity is on a declining projectory, there is little to give hope for a new long-term, profit-based expansion based on technological change, at least in North America and Europe where the ratio of productive to unproductive labour is already so low. I think my read on this is similar to Fred's. If not, I would be glad to hear, and if so, why? Paul, yes, I think our readings are very similar. Would you please send me any articles that you have written on this subject (or the references)? I look forward to further discussion. Comradely, Fred
Re: Estimating the surplus\Doug's question\Fred's comments
On Fri, 12 Dec 2003, Mike Ballard wrote: I'm obviously not an economist. Just a wondering Wobbly, Mike, what a great description! I wish there were more wondering Wobblies! Comradely, Fred
Re: Estimating the surplus\Doug's question
On Fri, 12 Dec 2003, Devine, James wrote: Paul,. your story makes sense (though I'd add a lot). My question is for Fred, though. The classical Marxian story stresses the role of the organic composition rising due to some societal or technological imperative. For Fred, the rise of the ratio of productive to unproductive labor costs has replaced -- or now complements -- that's story. I wanted to know his logic. Jim, I argue that the increase of unproductive labor complements the increase of the composition of capital. The rate of profit varies inversely with both of these, and varies positively with the rate of surplus-value. The simple algebra of this Marxian theory of the conventional rate of profit is as follows (as I am sure you know): RP = P / K = S - U / C + Ku = [ S/V - U/V ] / [ C/V + Ku/V ] Comradely, Fred
Re: Estimating the surplus\Doug's question\Fred's comments
On Sat, 13 Dec 2003, Doug Henwood wrote: Fred Mosley wrote: 6. I have suggested another explanation of these important trends, one based on Marx's distinction between productive labor and unproductive labor - that an important cause of the declines in the share and the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. I am not sure that this is the correct explanation of these trends, but I think it may be, and I think that it worthwhile to at least consider what Marx's theory implies about the causes of these trends and the likely prospects for the future. And one important advantage that this theory has over the profit squeeze explanation is that it provides a consistent explanation of why the share and rate of profit have only partially recovered in recent decades, in spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. This theory also provides an important prediction about the future - that if the ratio of unproductive to productive labor continues to increase (as I expect), then the recovery of the share and rate of profit will continue to be slow and partial, thus leading to more wage cuts, speed-up, etc. According to this theory, the US economy is definitely NOT at the beginning of another long-wave period of growth and prosperity, similar to the early postwar period (with steady real wage increases). The only partial recovery of the share and rate of profit makes such a return to more prosperous conditions very unlikely. Why should a national economy be the unit of analysis? Why can't U.S. capitalists and a significant portion of the U.S. population propser by appropriating the SV produced by, say, Chinese workers? Wal-Mart is a profit machine - is it productive or unproductive? Hi Doug, you are right that the appropriate unit of analysis is the world economy, and that surplus-value produced by e.g. Chinese workers is appropriated by US capitalists. But since this surplus-value is appropriated by US capitalists, it is mostly included in the estimates of profits in the US NIPAs. But this international aspect does mean that the estimates of the ratio of unproductive labor to productive labor in the US are overestimated. Comradely, Fred
Re: Estimating the surplus\Doug's question
On Sat, 13 Dec 2003, Doug Henwood wrote: Fred B. Moseley wrote: 5. The most popular radical-Marxian explanation of these profit rate trends has been the reserve army profit squeeze theory - that low unemployment rates in the late 1960s and early 1970s increased workers power, and enable them to gain substantial wage increases and to squeeze profits. This theory then explains the increase in the rate of profit on the higher rates of unemployment and the loss of workers' power in recent decades. This seems to be Doug's explanation of these trends. However, this profit squeeze theory does not provide a very good explanation of the only-partial recovery of the rate of profit, and especially the share of profit, in recent decades. One would think that, if greater worker power leading to wage increases in the 1960s and 70s caused the profit share to decline, then surely the last three decades of wage-cuts, speed-up on the job, and the general attack on workers and unions should have fully restored the profit share by now. Why fully restored? The 1950s and 1960s were a Golden Age with few if any historical precedents that followed the worst depression in history. The corporate sector had net losses in 1932 and 1933, something it's never come close to replicating since. But the corporate profit share of GDP rose from the low of 5.2% in 1982 to 8.7% in 1997, a 67% increase. Sure it's below the 10-11% levels of the mid-1960s, but it's a major recovery. And though I haven't gotten a chance to analyze the latest benchmark revision of the NIPAs, they show a very substantial rise in profits in 2001 and 2002 - an amazing performance in a recession and weak recovery. You are comparing a cyclical low (1982) with a cyclical high (1997). And do your estimates include interest? The estimates of the (profit + interest) share show cyclical ups and downs, but very little overall increase since the 1970s. The 1982-97 and 2001-2002 profit recoveries happened despite an increase in what you call unproductive labor. Why? In part because of the cyclical effects of higher capacity utilization rates, but also over the long-term because of a very significant increase in the rate of surplus-value, the ratio of the surplus-value produced by productive workers to the wages of productive workers (S/V in the following equation for the Marxian determination of the conventional rate of profit, included in a prior post): RP = P / K = S - U / C + Ku = [ S/V - U/V ] / [ C/V + Ku/V ] Comradely, Fred
Re: Estimating the surplus\Doug's question
On Sun, 14 Dec 2003, Doug Henwood wrote: Fred B. Moseley wrote: You are comparing a cyclical low (1982) with a cyclical high (1997). And do your estimates include interest? 1997 was four years before the cyclical high, actually. But the 1982 low was in many ways - political as well as economic - a point of structural reversal. Mexico's debt crisis marked the onset of neoliberal restructuring of the world; the stock market took off at almost the same minute as the Mexican quasi-default; and the Reagan boom was about to begin. That was about a lot more than a business cycle - it was about a whole new regime of accumulation. And my point is that this new regime of accumulation - whose main purpose was to restore the rate of profit - has been only partially successful. 1997 was the peak for the share and rate of profit, as you must know, after which they declined sharply, so that the share of profit in 2001 was almost as low as in 1982. Doug, do you think that profit has been restored to such an extent that the US economy is entering a new long-wave period of growth and relative prosperity, with signficant increases in average real wages? Comradely, Fred
Re: Estimating the surplus\Doug's question
I have been trying to find the time to join this interesting discussion on the rate of profit in the US economy. My classes finally ended yesterday. A few comments: 1. I think we can all agree on the big focus of profit rates, as Paul put it - that the rate of profit is the most important variable in analyzing capitalism. And I agree with Paul that this emphasis on profit and the rate of profit is what distinguishes classical-Marxian theories from neo-classical theories. 2. And I think we are talking about the same rate of profit and the same share of profit - as measured by the NIPAs. I (and most others) include interest so profit means total income to capital. 3. This conventional rate of profit declined about 50% in the early postwar period, and has regained only about half of that decline since the 1970s. The profit share declined less (about 30%), but has hardly increased at all in recent decades. 4. Where we mainly disagree (as Paul has pointed out) is about the CAUSES of these important trends - the causes of the decline, and the causes of the incomplete recovery. 5. The most popular radical-Marxian explanation of these profit rate trends has been the reserve army profit squeeze theory - that low unemployment rates in the late 1960s and early 1970s increased workers power, and enable them to gain substantial wage increases and to squeeze profits. This theory then explains the increase in the rate of profit on the higher rates of unemployment and the loss of workers' power in recent decades. This seems to be Doug's explanation of these trends. However, this profit squeeze theory does not provide a very good explanation of the only-partial recovery of the rate of profit, and especially the share of profit, in recent decades. One would think that, if greater worker power leading to wage increases in the 1960s and 70s caused the profit share to decline, then surely the last three decades of wage-cuts, speed-up on the job, and the general attack on workers and unions should have fully restored the profit share by now. The average real wage in the US economy has not increased since the early 1970s and has even declined some. Meanwhile productivity has continued to increase. And yet the profit share has hardly increased at all. This seems hard to explain by the wage push profit squeeze theory 6. I have suggested another explanation of these important trends, one based on Marx's distinction between productive labor and unproductive labor - that an important cause of the declines in the share and the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. I am not sure that this is the correct explanation of these trends, but I think it may be, and I think that it worthwhile to at least consider what Marx's theory implies about the causes of these trends and the likely prospects for the future. And one important advantage that this theory has over the profit squeeze explanation is that it provides a consistent explanation of why the share and rate of profit have only partially recovered in recent decades, in spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. This theory also provides an important prediction about the future - that if the ratio of unproductive to productive labor continues to increase (as I expect), then the recovery of the share and rate of profit will continue to be slow and partial, thus leading to more wage cuts, speed-up, etc. According to this theory, the US economy is definitely NOT at the beginning of another long-wave period of growth and prosperity, similar to the early postwar period (with steady real wage increases). The only partial recovery of the share and rate of profit makes such a return to more prosperous conditions very unlikely. This theory may be wrong, but it seems to me that it should at least be considered, and its economic and political implications pondered. I look forward to further discussion, as time permits. Comradely, Fred
Re: Estimating the surplus - Turkey (Cem Somel)
On Thu, 4 Dec 2003, Doug Henwood wrote: g kohler wrote: Concerning the Somel - Parmaksiz (based on ShaikhTonak) difference of estimates about Turkey - dont know. But regarding estimates of SV USA, Moseleys book compares his estimates with those of other authors. All of these authors measured the same theoretical concept (SV). But the estimates diverged considerably. One of the reasons was that other authors stayed closer to the statistical categories of the GDP accounting system, whereas Moseley re-cast the data into authentic Marxian categories. And the intellectual/political payoff for this authenticity is? Doug A different understanding of the causes of the decline of the rate of profit in the postwar US economy, and of the reasons for its only partial recovery, in spite of two decades of wage cuts, speed-up, etc.
Re: Rates of profit: a recent article
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
Re: Weapons hunters watch films
Hi Barkley, Your question about mass graves is a very good one. I hope someone has some more information. Fred On Mon, 16 Jun 2003, Barkley Rosser wrote: Date: Mon, 16 Jun 2003 15:02:05 -0400 From: Barkley Rosser [EMAIL PROTECTED] Reply-To: PEN-L list [EMAIL PROTECTED] To: [EMAIL PROTECTED] Subject: Re: Weapons hunters watch films Actually rather than comment on this issue directly, now that it is becoming increasingly clear to anyone paying attention (and here in the US Fox TV is trying very hard to focus peoples' attention on important stuff like the Laci Peterson murder), that both the WMD and al Qaeda-link arguments for the war in Iraq were completely bogus. So, the arguments that are being handed out to keep the wolves at bay are liberation of Iraqis (replay tapes of that small group hitting Saddam's statue with their shoes), torture chambers (yes, those were bad, they were also not news), and mass graves. I am wondering about these latter. It is my impression that the overwhelming majority of these are linked to the putting down of armed uprisings, especially in the immediate aftermath of the first Gulf war, rather than being dumping grounds for political prisoners coming out of the torture chambers. These are very different kettles of fish, needless to say, as the US has its own mass graves of the first sort, in such places as Gettysburg, to mention a well known one. Is there anybody on the list who has more information regarding what is what on this matter? Mass graves has increasingly become the new two word answer being used by war proponents to silence anyone daring to criticize it. Barkley Rosser - Original Message - From: Chris Burford [EMAIL PROTECTED] To: [EMAIL PROTECTED] Sent: Monday, June 16, 2003 2:12 AM Subject: Re: [PEN-L] Weapons hunters watch films At 2003-06-16 00:01 +0100, I wrote: On page 2 of Sunday Times, London Weapons hunters watch films as trail goes cold. by Christina Lamb, Baghdad. It looks as if some of it is an off the record leak by the senior UK representative in Iraq, to defuse little by little the growing problem for the UK (less so for the USA) if no WMD are found, and to explain the difficulties for the poor Brits in having to work with these Americans (who can't even fix the air-conditioning). On re-reading, I think Alastair Campbell's name at the beginning suggests the sequence. Campbell deliberately gave a low key background briefing in London. We do not know whether it was specifically to a Sunday Times reporter, or thrown away as an aside in a briefing to the press in general. Either way, the Sunday Times got their reporter in Baghdad to follow it up with a few direct interviews with the UK representative in Iraq, and with Brits in a weapons inspections team in an overheated bombed out palace, whose location had been kindly mad eavailable to the ST reporter. The London desk of the ST then checks for an official statement from the Pentagon and from the Prime Ministers official spokesperson, which ends the story off with a repetition of the official line. But Campbell is ever so discretely managing the news against Rumsfeld, just as Rumsfeld is callously ignoring the public embarrassment of the UK government. Campbell probably has Blair's consent in managing the explosive issues of the non-existent WMD in this way. The fingerprints are hardly detectable. Chris Burford PS I would be grateful if people do not cut and paste this article outside this list. It is not available on the ST website except through a specific search, presumably as part of the ST trying to build up e-business. It cannot be copied from the website and it includes a typo by me. My fingerprints are therefore also detectable. (Perhaps we should invite Campbell onto this list and have a discussion about 'processology'.) Of course it is all free advertising, so since the Sunday Times is probably the best of the Murdoch empire, I will add the URL www.timesonline.co.uk/section/0,,2086,00.html
Re: Falsifiability and the law of value
I argue that Marx's LTV is mainly a macro theory of profit, not a micro theory of prices. From this perspective, the main empirical test of Marx's LTV is the explanatory power of its theory of profit. I have written a paper on this topic, Marx's Theory: True of False? A Marxian Response to Blaug's Appraisal, in Moseley (ed.) *Heterodox Economic Theories: True or False?* (1995, Elgar). The Blaug in the title is Mark Blaug (of *Economic Theory in Retrospect*, etc.). I argue that Marx's theory of profit has considerable explanatory power. It explains inherent technological change, and inherent conflicts between capitalists and workers over the length of the working day and over the intensity of labor. It also explains the increasing composition of capital, the falling rate of profit, periodic crises, etc. In striking contrast, the orthodox theories of profit (or interest) - marginal productivity of capital, time preference, etc. - have little or no explanatory power. I argue that there is no contest here. Marx's theory wins hands down! Marx's theory of profit provides a much more substantial theory of capitalism's important dynamics than do the orthodox theories of profit. In Blaug's comment on my paper (in the volume referred to above), Blaug even concedes this point: The point is made as soon as it is said.[!] Neoclassical economics is essentially a static theory of resource allocation, and as such it does not make predictions about the dynamic evolution of the capitalist system. (p. 135) Blaug goes on to say that Marx's attempt to develop a theory of the long-run dynamics of capitalism is TOO AMBITIOUS and suggests that we should LOWER OUR SIGHTS THEORETICALLY speaking and ... settle for LOOSELY STRUCTURED HISTORIES of the evolution of the capitalist system, PREDICTING LITTLE because we CAN EXPLAIN SO LITTLE. (emphasis added) This statement is astonishing, coming from such a staunch Popperian, who his whole life has emphasized definite predictions as the hallmark of scientific theory. This abandonment of the attempt to develop a general theory of the long-run dynamics of capitalism is a clear admission of the failure of neoclassical economics. Therefore, if we want to continue to develop a general theory of the dynamic evolution of capitalism, Marx's theory would seem to be the best alternative, and indeed the only alternative. Comradely, Fred
Re: Rates of Profit: Recent Estimates\Japan
Hi Paul, Thanks again for your comments. A couple of responses below. On Wed, 15 Jan 2003, Paul_A wrote: Fred, This has been very useful. Thanks for the stimulating posts. The point about debt and financial fragility really must be kept as a prime issue. You asked for reactions about Japan and nationalizing the bank debt. I understand that by new proposal you mean it is a new alternative to the U.S. pushed proposal of a classic bankruptcy\deflation with assets being sold off cheaply (and bought by you-know-who). I also understand you are not asking about the political morality of the proposal, just how would it work out from the macro economic perspective of nation states and capitals. Right, I am mainly interested in a general theoretical analysis of the extent to which government policies could avoid, or minimize, the necessity of bankruptcies in order to reduce debt burdens. In order to be more effective, I imagine that the government bail-outs would also have to include writing off some of the debt of borrowers, not just taking over the bad loans of the banks. But this would of course cost the government even more. And even if debt burdens are reduced, these bankruptcy-avoidance policies still do nothing to raise the rate of profit. Doesn't the analogy to Latin America remind you of just how outrageous it was in the early '80s that their massive debt, largely private or non-sovereign, was nationalized without even a bargaining process or concessions? What cowardly and selfish leadership; how disingenuous of the Bretton Woods institutions to help push this along. Are you sure about this? I thought that most of this earlier Latin American debt was governent debt from the beginning. Please explain further. What were the main private sectors whose debt was taken over by the government? Thanks again. Comradely, Fred
Re: Rates of Profit: Recent Estimates
On Tue, 14 Jan 2003, Chris Burford wrote: On this model, the only important condition for the US economy to resume expansion without a period of substantial bankruptcies, would be if it receives an inflow of exchange value from the rest of the world. Perhaps in ways that are invisible to conventional economics? Hi Chris, I don't know exactly what you mean by an inflow of exchange-value from the rest of the world. Would you please explain further? If you mean an inflow of foreign *capital*, then that of course has already happened on a massive, unprecedented scale in the 1980s and 90s, which is one of the main things that has propped up the US economy, in spite of the drastic decline in the rate of profit. However, this inflow of foreign capital also has its limits, which we seem to be approaching. If this inflow slows down significantly in the years ahead (which seems likely), then this cushion for the US economy will be gone. And if the inflow ever turns into an outflow, then the US economy would be in deep trouble. Comradely, Fred
Re: Rates of Profit: Recent Estimates
Hi Paul A., Thanks again very much for your very interesting comments. A few responses below. On Tue, 14 Jan 2003, Paul_A wrote: Hi Fred, Thanks to you for your post and, more to the point, your hard work and serious contributions to precisely this question over a number of years. Yes, D L are very measured on this point. In fact they explicitly limit themselves to just presenting the stylized facts. Still, since seeing D L's numbers I am asking myself 'what-if' -type questions. [FWIW, my own view is just a shift to a neutral policy stance (to borrow the Fed's language). But I think we can usefully brainstorm.] My own sense of 'received wisdom' was certainly what you point out - that a sustainable long upswing required considerably more domestic pain (including bankruptcies) than the '77-mid 80s experience and that sooner or later we would face such a scenario in the U.S.. But below are some of the speculations (underline speculations) that I think we need to face (I am not advocating these points; just trying to bring them out for purposes of discussion): 1) Can we be vastly underestimating the importance of the international dimension? Certainly the third world HAS been seeing 1930's style bankruptcies and depression since '82. Eastern Europe goes far beyond that (although the impact of the big industrial collapse on U.S. profits would be somewhat different, at least in the first few years). Yes, this is a good point. Especially in Asia in recent years, where bankrupt companies have been sold off to foreign companies at bargain rates. Also, doesn't the scrapping of the old style U.S. industrial base and moving it overseas partially mimic a bankruptcy process? One does get the scrapping of physical capital (but admittedly not the write off of fictitious financial capital that comes with bankruptcy or debt restructurings). Maybe some of the financial write off comes with the stock market dip (I wonder how much of DL's core sector used the stock bubble to unwind their debt position; this could then be functional equivalent to a debt write off). Actually the relationship was the opposite: corporations borrowed huge amounts of money to purchase their own stock! Thereby increasing the price of its stock to the benefit of the top executives. In the late 1990s, something like half (!) of all the money borrowed by corporations was used for this purpose. Now the bubble has burst, but the debt still has to be serviced and repaid. It makes me want to dust off the debates of the classical imperial era on the role of foreign investment and trade on home profit levels. 2) Maybe upswings in today's world require a bit - just a bit - less pain than we previously thought (we generalized too much from the 1930s and its aftermath) to produce an upswing. I.e. Perhaps the 'pain-to-profit gain' coefficient need not be exactly like the 1930's. ((Before we try out numbers for the 19th century, let's remember Michael's point about how inexact out numbers are even today.)) I realize this is a slippery slope and one should proceed with great caution, but it is not a surrender to hydraulic Keynsianism to say some (just some) of the previous pain WAS unnecessary (even for their own long term interests) and the result of misguided government policy pushed on us by greedy narrow-minded interests. Is, say, Japan really likely to get that much more of an upswing by accepting that much more pain or are there boundary effects to the benefits of pain (such as Jim's points about an undertow or the 'overshooting'/domino effect that widespread bankruptcy produces)? There might also be boundaries on the profit level highs. Unless someone devastates Europe and Japan again (I shouldn't joke), should we really be expecting any upswing to produce profit levels like the early post-war peaks in core countries? In short, (just trying this out for discussion) maybe we've had a moderate restructuring\pain process (maybe with more to come) and that this IS what a moderate upswing looks like? If this is true, and this is as good as it gets, that's no praise for the system. In today's world, the high's and lows are just more reduced (for those who live in the core countries). Certainly, you could be right, and this possibility should be seriously considered. I think it is very difficult to know how much of an increase in the rate of profit is necessary to generate another long-run upswing in the economy. But the core rate of profit is only about half of its early postwar peak. That certainly does not seem like enough of a rebound to make possible a long-run upswing. The other crucial factor (besides the rate of profit) that you hardly mention is the record levels of debt of all kinds in the US economy - business debt, household debt, and
Re: Rates of Profit: Recent Estimates
Hi Paul, Thanks for calling our attention to the Dumenil-Levy article and for your comments and questions. I think it misleading to talk in terms of a new long-run upward trend in the rate of profit. I think D-L are measured and cautious in what they have to say about this. The recovery in the rate of profit since the early 1980s is very weak and partial. Excluding the highly capital intensive industries (Transportation and Public Utilities, and Mining) (as D-L suggest), the increase in the rate of profit since 1982 has been only about 25% of its prior decline, so that the rate of profit today is roughly half of its early postwar peaks. Extending the estimates to 2002 (which is a more appropiate comparison with 1982), as Jim D. suggests, would lower these %'s further. Plus, I am puzzled by the 25% increase in D-L's estimates of the profit share for the corporate sector. Other estimates that I have seen of the profit share show little or no increase in the profit share since 1982. For example, the BEA estimates for non-financial corporate business, in the SCB article that Jim D. cited (thanks, Jim), shows the profit share (including interest) in 2001 actually LOWER than in 1982 (14.5% compared to 15.8%. So I don't know how the D-L estimates increase so much. Maybe it is the difference between the corporate and non-financial corporate business sector, but I don't think so. In the past (as you no doubt know), strong recoveries of the rate of profit have been accomplished by the widespread bankruptcies of capitalist firms, which significantly reduces the capital invested (the denominator in the rate of profit) without reducing the capacity of the economy to produce profit. Such widespread bankruptcies have not yet happened in the US economy since 1982. While the absence of widespread bankruptcies has meant the absence of another great depression, it has also meant the absence of the main mechanism through which the rate of profit has been increased in the past. So, I continue to think that a long-run upswing in the rate of profit is not likely without such widespread bankruptcies and devaluation of capital. I think Japan is facing the same dilemma in even more intensified form. Comradely, Fred
Re: quesion from Michael Yates
On Wed, 8 Jan 2003, Michael Perelman wrote: Can anyone recommend a good article on the causes of stagflation in the US in the 1970s? Thanks. -- Hi Michael, You might want to take a look at my 1992 book *The Falling Rate of Profit in the Postwar US Economy*, and a more recent 1997 RRPE paper The Rate of Profit and the Future of Capitalism. Comradely, Fred
Re: PK on accounting reform
On Tue, 21 May 2002, Devine, James wrote: By the way, a media evaluation web-page voted PK's column the most consistently partisan of op-ed regulars. As I told PK, not that there's anything wrong with it. More partisan that pro-Israeli fire-eater and let's-go-get-Saddam William Safire? Fred
day of reckoning for the dollar?
Related to the Business Week article sent to the list last Friday by Jim D. on the danger of the US deficit on the current account and increasing foreign debt, below is an article in last Saturday's Financial Times, which concludes that the day of reckoning for the dollar is close at hand. The article emphasizes that the key problem is that it is not necessary for foreign investors to sell US assets for the dollar to fall. All that is necessary is that foreign investors cease to buy US assets, or buy them at a slower rate. And it argues that there are good reasons to believe that foreign investors may indeed purchase US assets at a slower rate in the coming months: US asset markets are no longer outpacing the rest of the world; the price-earnings ratio on US stocks is almost twice as high as on European stocks (the print version of the article has an impressive graph of this differential in price-earnings ratios, which has increased in recent months); and US bonds have become less attractive. One could add that the Enron scandal and the more general accounting crisis in the US have led many to have doubts about the value of US assets. If the day of reckoning is at hand for the dollar, then so it is for the US economy, which has become increasing dependent on foreign capital in recent years, and which would suffer negative consequences if this inflow of foreign capital were to slow down (rising interest rates, slower investment and growth, higher unemployment, etc.), and especially if it were to turn into capital outflows. Fred Analysts sense day of reckoning for dollar: A fall in capital inflows to the US has alarm bells ringing Financial Times; Apr 27, 2002 By CHRISTOPHER SWANN After a frustrating couple of years, dollar bears in the foreign exchange market are scenting blood. With the US economy supposedly leading the world out of recession, one might have expected the greenback to spring higher. In fact it has fallen by almost 3 per cent over the past month in trade-weighted terms. Currency strategists are asking whether this sign of vulnerability presages the long-awaited fall in the dollar or whether it is yet another false alarm. Defenders of the dollar are quick to point out that the recent weakness of the currency is largely the result of bets by speculative traders. Speculators have taken these positions several times over the past few years, only to be forced to withdraw their bets because fund managers continued to invest heavily in US assets. This argument would suggest that the recent weakness of the dollar could be relatively short-lived. But a rising number of analysts are unpersuaded by this sanguine analysis. This is not just a fire drill for the dollar, it is a real alarm, says David Bloom, currency strategist at HSBC in London. The key problem for the US currency is that investors do not need to sell US assets for the dollar to fall. All that is necessary is that they fail to buy. The bloated US current account deficit, running at about 4 per cent of gross domestic product, means that the US needs to attract a net inflow of around Dollars 1.5bn (Pounds 1.04bn) every day in order to stop the dollar falling. The latest figures from the US Treasury provide strong indications that capital inflows are finally drying up. In January the net inflow into US equities and fixed income was just Dollars 9.5bn. This is weak even compared with the Dollars 17.8bn the US attracted in September. Analysts say the US is struggling to attract funds because its asset markets are no longer outpacing the rest of the world. Over the past few years, just when one source of inflows for the dollar ran dry another would take over, said Ray Attrill, director of research at 4Cast, the economic consultancy. Now it is becoming harder to see how the US can attract enough funds to prevent the dollar from falling. Inflows into US corporate bonds, which funded the lion's share of the current account last year after mergers and acquisitions inflows dried up, are thought unlikely to be as important in 2002. Economists are concerned that recovery has been based on companies rebuilding their stocks after the slowdown and government spending rather than on a pick-up in investment spending. This is low-quality economic growth of the kind that does not boost corporate profits, said Paul Meggyesi, senior economist at Deutsche Bank. It is looking increasingly like the day of reckoning for the dollar is close at hand. Copyright: The Financial Times Limited 1995-2002
Re: Devine/Moseley discussion
This is a belated response to Jim D.'s post of Feb. 3. Jim, thanks again for your thoughtful posts. I too have found our discussion stimulating. I have been thinking about our agreements and disagreements, and trying to further clarify my own ideas. Due to limited time, I want to concentrate on the last part of your post which deals with the key issue of what adjustments are necessary for a sustainable recovery from the current recession. This last part of your post is as follows: On Sun, 3 Feb 2002, Devine, James wrote: The other crucial question is: what is necessary for a sustainable recovery from the current recession? I argue that a sustainable recovery requires an increase in investment spending, which in turn requires an increase in the rate of profit. One of the main ways to increase the rate of profit is to cut wages. This conflict between profit and wages is an unavoidable fact of life in capitalism, and it is intensified in recessions. Cutting wages is the old time religion for capitalists. (To quote Andrew Mellon, the Paul O'Neill of the late 1920s and early 1930s, liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.) It perhaps makes sense within the logic of capitalism - an essentially anti-human system - that the only way capitalism can prosper is on the backs of the workers. But, as I've said in my papers on the origins of the Great Depression of the 1930s, this logic only works if there's enough aggregate demand to allow the realization of the increased profits that result from cutting wages (relative to labor productivity). In a serious recession of the sort I think may be developing, business investment spending is blocked by extreme excess capacity, business debt, and pessimistic expectations. In that situation, capitalists are in a double bind: conditions push them to slash wages and speed up labor processes, which helps with profit production but (all else equal) makes the realization problem worse. This is what I've called the underconsumption trap. (If, in addition, we get into a full-scale deflation process involving falling nominal wages, that makes things even worse.) In this situation, the workers' struggle to prevent wage cuts and the like (or to actually raise wages) actually help capitalism, by allowing consumer spending to stay stable (or to rise). Keynesian fiscal policy can work here, though of course with the current balance of political power it's likely to involve tax cuts for the rich and increased military spending. You seem to be agreeing with me when you say the following: However, cutting wages will also reduce consumption in the short-run, and thus will make the recession worse. This is especially worrisome at the present time, because of the unprecedented levels of debt of all kinds - business debt and household debt and US debt to foreigners. These high levels of debt make the economy vulnerable to a more serious downturn. Therefore, the current dilemma seems to be: that which is necessary to solve the fundamental problem of insufficient profitability (cutting wages) will make the current recession worse (by reducing consumer spending), and, because of the high levels of debt, runs the risk of a very bad recession. I would agree with this analysis as far as it goes. However, it goes against what you said before, i.e., the conflict between profit and wages is an unavoidable fact of life in capitalism. If falling wages cause recessions to get worse, as you say, this makes capacity utilization and thus profitability worse. Then there is a community of interests (however limited to a specific economic situation) of capitalists and workers, no conflict between profit and wages. This potential community can be realized by organized pressure from workers and even the state. However, this is only on the macro level. Individual capitalists will continue to sink their own collective boat. To the extent that these individual interests are reflected in the state's policies, there's no reason to expect the state to do anything but make things worse. Final note: I noted in another missive that with increases in labor productivity (not due to speed-up), it's possible to raise wages and profits at the same time. That's true mathematically, but capitalism keeps on raising workers' needs. This can easily lead to a situation where real wages (as usually measured) rise in absolute terms but fall relative to needs. (Cf. Mike Lebowitz's BEYOND CAPITAL, ch. 1.) So the conflict is re-established. Jim Devine [EMAIL PROTECTED] You make a distinction here between the MICRO effects and the MACRO effects of a wage cut. There is a further distinction between the SHORT-RUN macro effects and the LONG-RUN macro effects, and I think the latter distinction is the key to the differences between us. I agree that, in the short-run, a reduction of wages would
Re: Re: Re: Re: O Joy -- another sign of recovery
On Wed, 13 Feb 2002, Doug Henwood wrote: Fred B. Moseley wrote: The point that is missed by the newspaper headlines and these excerpts is that retail sales as a whole, INCLUDING autos, DECLINED by 0.2% in January. Not a huge decline, but a decline. The AP headline from the NY Times website was Retail Sales Rise Sharply in January. Then the first sentence reads: A drop in car sales ... pushed down sales at the nation's retailers by 0.2 percent in January. Then it goes on to say: Excluding volatile automobile sales, overall retail sales rose by a solid 1.2 percent in January. There are two good reasons to strip away car sales - one, is that they're normally volatile, and can provoke meaningless swings in the headline number, and two, the 0% financing incentives last year stole a bunch of early '02 sales. So anyone trying to measure the underlying trend in consumption would want to see what's going on ex-autos. But good progressive economists are irresistibly drawn to the negative number. The weight of the evidence is that the U.S. economy is troughing, or did bottom out around December. This could be a false bottom, a pause before another downleg; the recovery could be weak, and might feel little different from recession. But there's not much point in ignoring the evidence. Doug, I don't think I am ignoring the evidence. Rather, the evidence is ambiguous. Strong auto sales was the main reason for the 0.2% increase in the GDP in the 4th quarter of 2001, which many economists hail as evidence that the recession is over. So now that auto sales are negative, are we supposed to ignore them and focus only on the rest of consumer spending? But the fact remains that total retail sales, as a proxy for total consumer spending, is now decreasing, rather than increasing at an annual rate of 5.4%, as it did in the 4th quarter. And thus the most important source of growth in the US economy right now seems to have been eliminated. My answer to your question in another post about whether increased consumer spending can be the cure for a recession caused by a decline in investment spending is NO. Because the decline of investment spending was caused by a decline of the share and the rate of profit, and businesses will continue in the months ahead to try very hard to increase profitability by cutting costs, especially wage costs. But such attempts to cut wage costs will also limit consumer spending in the months ahead. Fred
Re: Re: O Joy -- another sign of recovery
The point that is missed by the newspaper headlines and these excerpts is that retail sales as a whole, INCLUDING autos, DECLINED by 0.2% in January. Not a huge decline, but a decline. The AP headline from the NY Times website was Retail Sales Rise Sharply in January. Then the first sentence reads: A drop in car sales ... pushed down sales at the nation's retailers by 0.2 percent in January. Then it goes on to say: Excluding volatile automobile sales, overall retail sales rose by a solid 1.2 percent in January. Fred On Wed, 13 Feb 2002, Doug Henwood wrote: Date: Wed, 13 Feb 2002 13:09:00 -0500 From: Doug Henwood [EMAIL PROTECTED] Reply-To: [EMAIL PROTECTED] To: [EMAIL PROTECTED] Subject: [PEN-L:22787] Re: O Joy -- another sign of recovery Tom Walker wrote: . . . sales aside from cars posted their biggest surge since March 2000, aided by higher prices at the gas pump . . . I guess I'm just thick. I can't figure out how anyone figures a surge in retail sales if the uptick is entirely due to higher gas prices and excluding slumping car sales from the total. As Max pointed out, the recent surge in 4th quarter GDP was in real terms, after adjusting for price deflation. That number included car sales bloated by 0% interest rates. Lies, damned lies and audited financial statements. Sorry to disappoint, Tom, but taking out gas station sales as well as autos, retail sales were still up 0.8% month-to-month. Surge is jounrnalistic hyperbole, for sure, but consumption is holding up in the U.S. And with the initial unemployment claims falling and consumer confidence rising, it's looking very much like a trough. It could all fall apart, but it ain't yet. And the Redbook retail sales survey for the first week of Feb was up 4.2% year-on-year, bringing the three-month moving average to +1.9%. Since auto sales are much stronger than anyone expected after the fading of 0% financing, retail is looking pretty strong. Sorry again. Doug
Re: Enron's SPV's
Steve, thanks again for your helpful clarifications. It sounds like after the private placement takes place and the SPV pays off its loan, there is nothing left of the debt of the SPV, and hence of the debt of the Parent. Is this the case with Enron? Do all there 3000 SPV's have little or no debt left? So there is little or no hidden debt of Enron? Or, are SPV's also used for other operations (like the purchase of stocks of other companies) that require some continuing debt? Thanks again, Fred On Sat, 2 Feb 2002, Steve Diamond wrote: Yes, I realize I left out a few things. The debt that the SPV takes on is used to front the money for the asset (like speculative broadband futures) from the parent. But the SPV soon pays off this loan by selling its new securities in the private placement. In fact, the loan that the SPV takes on might just be an LOC (letter of credit) or very short term since the private placement with 3d party investors is done almost simultaneously. In the deals I worked on of this general type while in private practice, the SPV was set up at the same time as the placing of the securities, tho I am certain there is a wide range of possibilities. Keep in mind that in most cases the SPV's underlying equity is controlled by the Parent, thus they really set the value of the asset. In the case of Enron, CFO Jeff Fastow was an officer (or general partner) of these types of entities. One can see how this can easily lead to an inflation of the value of the asset. It is this step that creates the fictitious value - establishing some notion of the present value of an asset that will only pay out over a long time in a very inefficient, even nonexistent, market (what IS the market for broadband? ENE was creating it thus they could decide the price!) It is hard not to conclude that this was an elaborate pump and dump scheme (see the terrific film Boiler Room to get a sense of what kinds of snakes these people really are). Also, I understand your interest in the debt, but keep in mind that the bank that provides the loan for the SPV is only taking on the risk that the SPV will not be able to complete the private placement to the third parties - in fact, the loan is really just a guarantee - serving to provide some reputation effect to help get the private placement done - in one case, for example, a piece of the private placement was sold to the MacArthur Foundation, so you have to convince one of their fund managers that this was a great deal - the investment banker marketing the deal will, of course, point to the loan from, e.g., JP Morgan. Often the loan would not go through unless the private placement was clearly going to succeed. Once started the entire operation - for up to a billion dollars - can be done in six weeks. Steve Stephen F. Diamond School of Law Santa Clara University [EMAIL PROTECTED]
Re: Take the Money Enron.
Hi Steven, Thank you very much for your very interesting Take the Money Enron ... I was especially interested in the following paragraph: Unfortunately, hundreds of companies now rely on this explosive combination of private placements and off balance sheet entities. The last decade has seen the American economy create a massive amount of new paper financial obligations using these structures that cannot possibly be supported by the productive base of the economy. In fact, little attention is being paid to what is happening in this real economy, made up of steel mills, auto assembly plants, health care services, and our physical infrastructure, which turn out the products and services that a society truly needs to eventually pay off all of these fictitious claims to society' s wealth. I have a data question for you: The main source of data on debt of non-financial corporations (NFCB) is the Fed's Flow of Funds accounts. It seems to me that most of the off balance sheet debt created in the 1990s would NOT be counted in the Fed's data for the NFCB sector, since the borrower in most of these cases is a financial partner of a NF corporation. At most, it would be counted in the Financial sector, whose debt increased roughly twice as fast as the NFCB sector in the 1990s. Or, in the most hidden (off-shore) cases, it might not be counted by the Fed at all. If this is correct, then the Fed's data underestimates the current debt obligations of the NFCB sector. I wonder how significant this underestimation might be? Steven (and others) what do you know about this? Thanks very much. Fred Moseley
Re: Enron SPV's and debt
Steve, thanks for your very clear and helpful description of the typical SPV. Better than anything I have read yet. My main question at the moment has to do with step (ii), the money the SPV borrows. This debt is off the balance sheet of the Parent, although the Parent still has contingent liability. And I would like to know how much of this off the balance sheet debt is out there for the NFCB sector as a whole? (and ultimately of the Financial sector as well, but right now my main interest is the NFCB sector) How widespread is this scheme for the NFCB sector as a whole? How much off the balance sheet debt was created by NF corporations in the 1990s? Any idea? Know of anyone who might? And also a question about steps (iii) and (iv): the SPV buys the asset from the Parent, right? Otherwise, the Parent could not book the $100m as revenue, right? It seems to me that the main purpose of this scheme is step (iv): to increase the reported revenue, and hence the reported profit, of the Parent. Is this correct? Thanks again, Fred
Re: Re: Re: Enron SPV's and debt
I wonder if Portnoy has an idea of how much debt of the NFCB sector is off the books? Fred On Sat, 2 Feb 2002, Michael Perelman wrote: Date: Sat, 2 Feb 2002 18:10:20 -0800 From: Michael Perelman [EMAIL PROTECTED] Reply-To: [EMAIL PROTECTED] To: [EMAIL PROTECTED] Subject: [PEN-L:22248] Re: Re: Enron SPV's and debt Fred, the Portnoy testimony that Steve mentioned is excellent is laying out the mechanism. On Sat, Feb 02, 2002 at 09:04:12PM -0500, Fred B. Moseley wrote: Steve, thanks for your very clear and helpful description of the typical SPV. Better than anything I have read yet. My main question at the moment has to do with step (ii), the money the SPV borrows. This debt is off the balance sheet of the Parent, although the Parent still has contingent liability. And I would like to know how much of this off the balance sheet debt is out there for the NFCB sector as a whole? (and ultimately of the Financial sector as well, but right now my main interest is the NFCB sector) How widespread is this scheme for the NFCB sector as a whole? How much off the balance sheet debt was created by NF corporations in the 1990s? Any idea? Know of anyone who might? And also a question about steps (iii) and (iv): the SPV buys the asset from the Parent, right? Otherwise, the Parent could not book the $100m as revenue, right? It seems to me that the main purpose of this scheme is step (iv): to increase the reported revenue, and hence the reported profit, of the Parent. Is this correct? Thanks again, Fred -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Re: the profit rate recession
On Mon, 28 Jan 2002, Doug Henwood wrote: Devine, James wrote: the data that Fred Moseley and I are discussing is from the BEA and is available at: http://www.bea.doc.gov/bea/ARTICLES/2001/09september/0901ror.pdf or http://www.bea.doc.gov/bea/ARTICLES/2001/09september/ror.xls. These data are not disaggregated by industry. Ah, but their definition of profits adds interest back in. That's a useful measure for some purposes, but money spent servicing debt isn't available for investment or dividends. The rate of profit defined gross of interest is a broader measure of the return to capital for the capitalist class as a whole. The rate of profit defined net of interest is also affected by the division of the gross profit into non-financial profit and interest. Doug is right that, from the point of view of individual non-financial capitals, the money they pay in interest cannot be invested BY THEM. However, from the point of view of the capitalist class as a whole, the interest collected by financial capitalists can (and usually will) be loaned out and invested by someone else in one way or another. Doug is also right that the net rate of profit has increased slightly more than the gross rate of profit since 1982. This is because lower rates of interest in the 1990s have reduced interest payments and raised the net rate of profit relative to the gross rate of profit (i.e. nonfinancial capital received a larger share of the gross profit). However, from 1965 to 1982, the net rate of profit DECLINED MORE than the gross rate of profit, for the opposite reason (increasing interest rates and nonfinancial capital received a smaller share of the gross profit). So that, for the whole period from 1965 to 2001, the net rate of profit declined more than the gross rate of profit. According to my calculations (from the estimates in the SCB article by Larkin and Morris), the gross rate of profit in 2000 was 36% below the 1965 peak and the net rate of profit was 45% below the 1965 peak. And if reasonable estimates for 2001 are added, the declines for the whole period are 46% for the gross rate of profit and 59% for the net rate of profit. Thus, by either measure, there was a very significant decline in the rate of profit from 1965 to 1982, and a much smaller increase since then, so that the rate of profit today is about 50% below its 1965 peak. As I have said, the fundamental problem of insufficient profitability has not yet been solved. It has been masked by accounting tricks, including fraud (as Michael P. suggests), but it has not yet been solved. Fred
Re: the profit rate recession
On Mon, 28 Jan 2002, Charles Brown wrote: the profit rate recession by Fred B. Moseley 28 January 2002 00:20 UTC My conclusion from these estimates, as I have said many times before, is that the fundamental problem in the US economy of insufficient profitability has not yet been solved and continues to causes recessions and stagnation. CB: Do you think this fundamental problem can be solved through reforms ? 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. 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. 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. Perhaps a reform that will make the bankruptcy process less disruptive of production and employment would make the restoration of profitability less painful. Chapter 11 bankruptcy already does that to some extent. But the problem is that in a bankruptcy, someone has to lose a lot of money, and there will usually be a fight over that, e.g. the bankruptcy of Global Crossing announced today (the second largest bankruptcy in US history, second only to Enron). Fred
Re: Re: Re: : The rate of profit and recession
On Tue, 29 Jan 2002, Doug Henwood wrote: Rakesh Bhandari wrote: The Fed is powerless to change this; fiscal policy can relieve realization problems but the resumption of private investments depends on the restoration of profitability through the devaluation of constant capital and a rising rate of surplus value. So, translating into demotic English - one of the most aggressive easing streaks in Fed history will have no effect, and there will be no recovery anytime soon? Are you expecting a long stagnation or a deep depression? I think that it is very unlikely that the Fed's expansionary monetary policy will be successful in reviving investment spending anytime soon, because of continuing problems of low profits, high debts, and low capacity utilization rates. The US economy is not going to be pulled out of recession in 2002 by increased investment spending. It is possible that consumer spending will continue to be strong, in spite of a decline in disposable income, and that households will make up the difference by going even deeper into debt than they already are. US households seemed to be determined, come hell or recession, to continue their recent spending spree, even though their disposable income has declined (and promises to decline even more), and even though their continued spending requires rapidly increasing debt. In this case, there might be a slow recovery in 2002, but only as the result of households increasing their already heavy and unprecedented debt burdens. This does not seem to be a very strong basis for a sustainable recovery. And the fundamental problem of insufficient profitability remains, and will continue to depress investment and thus the economy in general. Fred
Re: the profit rate recession
On Fri, 25 Jan 2002, Charles Brown wrote: the profit rate recession by Fred B. Moseley -clip- The main point of disagreement seems to be - whether or not the decline of investment spending that caused the recession was itself caused by the decline in the rate of profit since 1997. I argue yes and you argue no. You argue that business investment decisions are not determined by short-run cyclical fluctuations in the rate of profit, but are instead determined by the long-run trend in the rate of profit, and also by the capacity utilization rate. CB: Fred, Hope your child is better. He is, thank you, but then I got it! An awful flu eminating from school and circulating through families. What if the decline in the rate of profit is due to failure to realize through sale of commodities, failure to complete fully the C-M' phase of M-C-M' ? The rate of profit declined from 1997 to 2000, and during this time the US economy was booming and there was no realization problem. This decline in the rate of profit is what caused the decline in investment spending, which in turn caused the recession. Since the recession began, there has been a realization problem, which has further reduced the rate of profit. But this further decline in the rate of profit due to realization problems was an effect of the recession, not a cause. Charles, does this make sense to you? Thanks, Fred
Re: Re: Re: the profit rate recession
On Fri, 25 Jan 2002, Doug Henwood wrote: Michael Perelman wrote: Doesn't fraud also accompany a falling rate of profit? I have thought about this relationship quite a bit, but I have seen relatively little written about it. As profit rates fall, companies resort to more and more risky behavior to compensate for the fall into rate of profit. In the process, they resort to first flaky and then fraudulent behavior. In the US, the profit rate rose from the early 80s until around 1997. Funny accounting also increased over the period - in bull markets, people don't want to hear bad news, and they want profits to grow rapidly forever. The bursting of a speculative bubble brings calls for tighter accounting. Doug, this may be misleading. The rate of profit certainly did not increase continuously from 1980 to 1977, and then decline. Rather, the rate of profit fluctuated up and then down in the 1980s, so that the rate of profit in 1992 (7.0%) was only slightly higher than it was in 1980 (6.2%). Similar fluctuations (with somewhat larger amplitudes) occurred in the 1990s, first an increase to 1997 and then a sharp decline to 7.1% in 2001). So that the rate of profit today remains only slightly above what it was in the trough of the early 1980s. My conclusion from these estimates, as I have said many times before, is that the fundamental problem in the US economy of insufficient profitability has not yet been solved and continues to causes recessions and stagnation. Best, Fred
Re: re: the profit rate recession
Hi Jim, I am sorry for my delay in responding to your last message of Monday, Jan. 14. A sick son, an overdue paper deadline, and classes starting next week have kept me otherwise occupied. I just have time for a few brief comments. We seem to agree on the following points (please correct me if I am wrong): 1. The rate of profit declined significantly from the mid-1960s to the 1970s, and this declining profitability was the main cause of the stagflation of recent decades. 2. If the rate of profit is examined from 1980 to 2002 (estimated), then there is little or no upward trend in the rate of profit over this period (and even a slight decline in the share of profit). The years 1980 and 2002 are appropriate end points for the estimation of the trend, because they are at the same point in the business cycle - the bottom of a recession. You have other arguments, using other end points and other selected years, that the rate of profit has increased since 1980. But you acknowledge that all these different measures show only a small increase, and that the rate of profit today remains significantly below its earlier postwar highs. 3. The current recession was caused by a sharp decline in investment spending, beginning in late 1990. 4. The current recession could be made worse because of a subsequent decline in consumer spending. The main point of disagreement seems to be - whether or not the decline of investment spending that caused the recession was itself caused by the decline in the rate of profit since 1997. I argue yes and you argue no. You argue that business investment decisions are not determined by short-run cyclical fluctuations in the rate of profit, but are instead determined by the long-run trend in the rate of profit, and also by the capacity utilization rate. However, it has been widely discussed in the business press that investment collapsed in 2001 as a result of rapidly deteriorating profitability. As we have discussed, the rate of profit turned down in 1997, and has continued to decline ever since, and finally took its toll on investment spending in late 2000. This is how business executives themselves have explained their reductions of investment spending. The investment cutback was probably also influenced by the long-run decline in the rate of profit since the mid-1960s. But the primary precipitating factor seems to have been the sharp decline in the rate of profit since 1997. The capacity utilization rate declined as a RESULT of the recession, it is not a cause of the recession. In the months ahead, the low capacity utilization rate will certainly have a negative effect on investment spending, and thus will make a recovery from the recession more difficult. But the low capacity utilization rate did not cause the initial decline in investment spending which caused the recession. Jim, I still don't understand what you think caused the decline in investment spending that caused the recession. The other crucial question is: what is necessary for a sustainable recovery from the current recession? I argue that a sustainable recovery requires an increase in investment spending, which in turn requires an increase in the rate of profit. One of the main ways to increase the rate of profit is to cut wages. This conflict between profit and wages is an unavoidable fact of life in capitalism, and it is intensified in recessions. However, cutting wages will also reduce consumption in the short-run, and thus will make the recession worse. This is especially worrisome at the present time, because of the unprecedented levels of debt of all kinds - business debt and household debt and US debt to foreigners. These high levels of debt make the economy vulnerable to a more serious downturn. Therefore, the current dilemma seems to be: that which is necessary to solve the fundamental problem of insufficient profitability (cutting wages) will make the current recession worse (by reducing consumer spending), and, because of the high levels of debt, runs the risk of a very bad recession. Jim (and others), do you agree or disagree with the above? Thanks again for the discussion. Fred
Re: Re: Re: Re: the profit rate recession
On Mon, 14 Jan 2002, Doug Henwood wrote: Rakesh Bhandari wrote: yes what the previous collapse in basic memory chips suggests is that constant capital had cheapened so considerably (esp relative to consumer goods as is almost the case, I believe) that the rate of profit on the lower value of this constant capital can now be greater even if the rate of surplus value is not going to vary much one way or another. So the demand for constant capital is picking up (and therewith the prices of memory chips) not because consumption is higher (as a crude and even sophisticated unconsumptionist may think) but because profitability is being restored. Doug, you know i am an autodidact but isn't this the ABC's of the Marxian theory of the business cycle? You're too modest with the autodidact label. But I'm not speaking church Marxian - I was speaking vulgate, and bizcycle economics is about as vulgar as it gets. My only point was that if Hyman is right, then consumption won't be collapsing, and the recession is over, or almost over. And this recession had little to do with consumption - it was mostly profit and investment-led (at least in the U.S.). Doug Hi Doug, I agree completely that the causes of this recession have little to do with consumption (at least so far), and have mostly to do with falling profits and investment. This is the main point I have been arguing in my discussion with Jim D. Greenspan emphasized again in a speech last week that weak profits and investment is a reason for continuing concern about the economy. Fred
Re: Re: the profit rate recession
On Mon, 14 Jan 2002, Doug Henwood wrote: Rakesh Bhandari wrote: At any rate, the crisis hit Dept I first. Consumption was not a problem. We also know Marx's famous vol II passge in which he criticizes underconsumption. Consumption will now give. We'll see. Wall Street's favorite economist, Ed Hyman, has a piece out today claiming the U.S. recession probably ended in November (citing, as most recent evidence, a decline in unemployment claims, higher-than-expected chain store sails, a 23% surge in DRAM prices over the last week, and several major positive profits surprises). And, he says, a synchronized global recovery is underway, citing higher Taiwanese exports, UK retail sales, Malaysian industrial production, and Canadian housing starts over only the last few weeks. Finally, in November, his composite leading indicator for the OECD had its biggest monthly increase in 18 years. For what it's worth, of course Doug Doug, are you agreeing with Hyman and this growing consensus? What about the recovery of profits and investment? If the cause of this recession is mostly falling profits and investment, as we seem to agree, isn't a necessary condition for recovery from the recession the recovery of profits and investment? How likely is a recovery of profits in the coming months? That would seem to be the crucial question. Does Hyman say anything about profits? What does Henwood say? Thanks, Fred
Re: the profit rate recession
Over, the weekend I read with interest Jim D's explanation of the millennium crisis (i.e. the current recession) on his website, which was discussed last week on PENL. I also read his RRPE 2000 paper on the rise and fall of stagflation. I mostly agree with the latter and strongly disagree with the former. Jim, as I understand it, you argue that the main cause of the current recession was an INCREASE in the rate of profit from 1982 to 1977. It is not entirely clear to me how an increase in the rate of profit could cause a recession, but the argument seems to something like the following: The increase in the rate of profit was in large part caused by an increase in the share of profit, which in turn was caused workers' wages increasing slower than the value added of the output. However, the slower wage growth, which caused the share and the rate of profit to increase, also caused problems of insufficient demand for consumer goods (i.e. problems of underconsumption), which eventually caused the recession. Jim, is this roughly correct? Please correct or elaborate. If this is correct, then this theory would seem to suggest that, in the quarters leading up to the beginning of the recession in 2001, consumer spending should have been very weak. However, THE OPPOSITE IS THE CASE. As is well-known, US consumers have been on an extended spending spree in recent years, which has resulted in rapid rates of increase of consumer spending (consumer spending has increased faster than value added). Indeed, consumer spending is STILL INCREASING in the fourth quarter of the recession, spurred in large part by the zero interest incentives on automobiles, plus continuing strong credit growth in general. It is possible (though I think unlikely) that this will be the first recession in US history in which consumer spending does not decline! Nothing is said these days about weak consumer spending. Thanks is always given for strong consumer spending. What has collapsed, by striking contrast, has been investment spending, which has declined about 10% since mid-2000, and is still declining. Computer hardware makers, not consumer goods makers, were the hardest hit by the recession. In the words of the Cisco CEO, investment demand fell off a cliff. These facts contradict an underconsumption explanation of the current recession, and suggest instead that this recession was caused by the collapse of investment spending, not by insufficient consumer spending. Jim, am I missing something? I would argue further that the sharp decline in investment spending since later 1999 was caused by an even bigger decline in the rate of profit from 1997 to 2000, which in turn was caused mainly by a similar decline in the share of profit over this period. The decline in the profit share since 1997 has been so strong that it has completely wiped out the previous increase in the mid-1990s (I will focus on the profit share since the estimates are easier). The profit share today is no higher that it was in the trough of the early 1980s. Jim's estimates are taken from Larkin and Morris (2001) and ultimately from the SCB (BEA). These estimates go through the year 2000, which shows a small increase over 1982. However, if these estimates are updated through the third quarter of 2001, we find that there has been a further significant decline, so that the profit share in 2001 will probably turn out to be even lower that it was in the trough of 1982 (0.15), and will probably set an all-time record low for the postwar period of 0.14. (These estimates are for the NFCB sector.) Therefore, I argue that the current recession has been caused, in classical Marxian fashion, by a sharp decline in the rate of profit, which caused investment spending to fall. The causal relation between the decline of the rate of profit and the decline of investment spending in the current recession seems to be widely understood, including even by the Federal Reserve Board, which in its terse explanations of its interest rate cuts this year, has repeatedly emphasized rapidly deteriorating profitability and its negative effect on investment spending. Jim, what is surprising is that in your RRPE (2000) paper, you argue, along classical Marxian lines, that the cause of stagflation on the 1970s and 80s was a decline in the rate of profit, and that the cause of the end of stagflation in the 1990s was an increase in the rate of profit since 1980 (this latter conclusion needs to be reconsidered in light of more recent data). I agree completely that the cause of the stagflation of recent decades was the significant decline in the rate of profit in the early postwar period (a decline of roughly 50%). As you know, I have been making a similar argument for years. However, you now argue that the current recession was not caused by the decline in the rate of profit since 1997, but was instead caused by the increase in the rate of profit prior to 1997,
Re: NS update on anthrax source
On Sat, 3 Nov 2001, Chris Burford wrote: Today's New Scientist (as always, informed, materialist, progressive in political leanings) has an article The secret is out The anthrax spores in the letters seem to have undergone the same 'weaponisation' technique used to make US bioweapons in the 1960's, a source who cannot be named told New Scientist this week. This involves treating anthrax cultures with chemicals that make them break into small clumps of spores as they dry, allowing them to stay separate, airborne, - and inhalable. ...the US 's weaponising recipe is supposed to be a closely guarded secret. If the anthrax has indeed undergone US-style weaponisation, then either the secret is out or the attacks are being made with leftovers from the American weapons programme. Analyses of the anthrax have focussed on the largest sample available, from the envelope sent to Senator Tom Daschle. These particles are between 1.5 and 3 micrometres across, and contain the drying agent silica but no traces of the anticaking agent the Iraqis tried to use without success. The Soviets did succeed in making dry anthrax, but their milling process reportedly yielded particles with a wider size range. The spores found in ventilation filters in Washington DC postal offices, and the growing number of cases in postal workers, also support the idea that the anthrax was treated to help it spread through the air. Half of the 16 victims so far worked for the US Postal Service. [Now what sort of person could be that unnamed source. And why would they want this information discretely public?] A dove who wants to counteract the attempt by hawks to blame the anthrax scare on Iraq as a pretext for invading Iraq. That issue is on the back burner for now, but I fear it will eventually come back to the front burner. Fred
Re: Re: Re: Re: Japanese Liquidity Trap
On Tue, 30 Oct 2001, Chris Burford wrote: The classic description by Engels of capitalist crises observes in 1877 that the world was at that time going through its 6th crisis since 1825. In this he describes how the markets are glutted (as in present day Japan) but further hard cash disappears, credit vanishes. I wonder whether we are looking at the same cyclical processes only cushioned rather than cured by the additional Keynesian interventionist attempts by central government at least to avoid a crisis of the circulation of finance capital. It just can do nothing about restoring the rate of profit. And with the newly coined(?) term 'liquidity trap' we see that even if such measures make the crisis less acute, they may make it worse. Chris, I think you are exactly right about this. This is the answer to your puzzle of several weeks ago - that Marx predicted high interest rates at the peak of an expansion, but now we have low interest rates. The answer, as you say, is expansionary monetary policy, which was non-existent in Marx's day, but is widely used today. Expansionary monetary policy may make the crisis less acute, not by reviving business investment (that requires a revival of the rate of profit), but rather by lowering the interest burden of existing debts. But expansionary monetary policy cannot solve the fundamental problem of insufficient profitability (too low rate of profit). That requires the liquidation of large amounts of capital, through bankruptcies, write-offs, etc., as you have emphasized in other recent posts. At least according Marx's theory. And Marx's theory seems very much to be supported by what is going on in the world economy today. Comradely, Fred
Re: Re: failing firms must be promptly liquidated
Chris, I seem to have deleted by mistake your #19226 on 31 Oct. about the comment by Prof. Kakagi on p. 12 of last week's English Language Nikkei Weekly (how did you find this?!) that failing firms must be promptly liquidated. I agree that the latest proposals of the Japanese Bankers Assoc. is mild medicine. Tough words, little action. This is what Japanese government officials have been doing for the last 4 or 5 years, ever since the gravity of the Japanese banks' bad loans problem became apparent. They just can't seem to bring themselves to liquidate, liquidate, liquidate. They want a softer, more humane capitalism, and are trying to avoid the hard-nosed, cold-blooded US variety. And they think it can work, i.e. that this can be a way out of Japan's bad loans problems and deepening recession. But, according to Marx's theory, there is no softer way to get out of the problems of low profits and high debts. The only way to solve these problems is to liquidate, liquidate, liquidate. Which will of course make the recession worse, and perhaps turns the recession into a depression, at least in the short-run. The question is: how long will the short run last? Japanese officials (and bankers and capitalists) do not seem want to take this chance, and with good reason. Fred
Re: Re: failing firms must be promptly liquidated
On Thu, 1 Nov 2001, Chris Burford wrote: At 31/10/01 20:38 -0600, you wrote: On Wednesday, October 31, 2001 at 17:35:00 (-0800) Michael Perelman writes: Chris, the economy will be stronger after liquidation -- if it survives the shock -- but it will mean mass unemployment and a further concentration of economic ownership. ... liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. ---Treasury Secretary Andrew Mellon, advising Herbert Hoover in 1930 Bill Yes, Prof Takagi and Andrew Mellon were perhaps right wing Marxists without even knowing it. Marx described this back in 1848. And of course the destruction of capital, includes the destruction of a portion of living variable capital - the section of the work force that are thrown out of the capitalist wage system until hopefully at some time eventually the capitalist cycle picks up again and they have the opportunity to leave the reserve army of labour. I do not think there is much serious dispute about the overall pattern of capitalist cycles, if the bourgeois can permit themselves to be really frank (like in an article tucked away on page 12 of the Nikkei Weekly). The progressive question is what very very little can working people do to buck the trend? If there is any influence that can be brought to bear at all, it would be better to update mechanisms of social control over the production process than merely to try to mitigate cuts in the average real wage. Perhaps the whole apparatus of apparently responsible banking that Takagi appears to describe should be updated by making the bidding for development or liquidity funds more transparent and democratic and to take into account the views of works councils, the local environment and the community. But the brutality of the overall process is as Marx indicated. Yes, I agree. I think leftist economists should be able to discuss all this quietly and penetratingly with the rapidly expanding ranks of neo-Keynesians. But who else recognizes the centrality of the rate of profit in the behavior of the macroeconomy? Who else even has the rate of profit as a variable in their theory? I hope there are some such neo-Keynesians that I have overlooked. Fred
Re: Re: Fed's actions
Thanks very much to Bill Burgess for further information on the Fed's infusion of cash last week. I have not seen anything in the papers this week about further infusions of cash (only the 1/2 point reduction in the fed. funds rate). Has anyone else seen any reference to further cash infusions this week? Thanks, Fred On Sat, 15 Sep 2001, Bill Burgess wrote: Date: Sat, 15 Sep 2001 23:25:24 -0700 From: Bill Burgess [EMAIL PROTECTED] Reply-To: [EMAIL PROTECTED] To: [EMAIL PROTECTED] Subject: [PEN-L:17211] Re: Fed's actions I don't think this is all for buying bonds, but Saturday's Globe and Mail reports a $US 82.5 billion infusion of short term cash into the US financial system by the Fed on Friday, for a total of $188 billion since Wednesday. An economist with J.P. Morgan Canada is quoted as estimating the addition of funds this week by the Fed was 20 times the normal amount. Bill Burgess At 12:51 AM 16/09/01 -0400, you wrote: A question for Doug Henwood (Hi Doug) and others: The New York Times reported on Friday that the Fed purchased government bonds of $70 billion on Thursday (after buying $38 billion on Wednesday), which it called one of the biggest such operation in memory. It also said that on a normal day the purchase would be several billion dollars. Does anybody know: 1. Other examples of such high purchases, and what the numbers were? 2. How much the Fed purchased on Friday, which was not reported in Saturday's paper (at least I couldn't find it). Thanks in advance, Fred Moseley P.S. The Monday opening of Wall St. should be very interesting.
Fed's actions
A question for Doug Henwood (Hi Doug) and others: The New York Times reported on Friday that the Fed purchased government bonds of $70 billion on Thursday (after buying $38 billion on Wednesday), which it called one of the biggest such operation in memory. It also said that on a normal day the purchase would be several billion dollars. Does anybody know: 1. Other examples of such high purchases, and what the numbers were? 2. How much the Fed purchased on Friday, which was not reported in Saturday's paper (at least I couldn't find it). Thanks in advance, Fred Moseley P.S. The Monday opening of Wall St. should be very interesting.
Re: Journal of Economic Perspectives
I think Brad De Long's idea of a JEP mini-symposium on "radical economics" is an excellent one, which I appreciate. One possibility to consider: I edited a book published in 1995 entitled *Heterodox Economic Theories: True or False* (the title was a take-off on one of Mark Blaug's books). One of the sections was on "radical economics." Michael Reich (one of Brad's colleagues at Cal-Berkeley) wrote a response to a previous "methodological appraisal" of "radical economics" by Blaug, Blaug responded, and a comment on this exchange was made by economic methodologist Wade Hands. I think the debate was interesting. Perhaps these individuals could adapt and "update" their appraisals for the JEP. Also, Brad, how about a similar mini-symposium on "Marxian economics" (as distinct from "radical economics")? My edited book also includes a section on "Marxian economics", in which I responded to a similar "methodological appraisal" of "Marxian economics" by Blaug, Blaug responded again, and this exchange was commented on my Bruce Caldwell. Maybe something along these lines could be adapted for the JEP? These papers were originally presented at a session sponsored by the History of Economic Society at one of the ASSA meetings (in Annaheim, as I remember). Thanks again for your suggestion. Fred Moseley On Tue, 1 Feb 2000, Brad De Long wrote: Date: Tue, 1 Feb 2000 15:14:10 -0800 From: Brad De Long [EMAIL PROTECTED] Reply-To: [EMAIL PROTECTED] To: [EMAIL PROTECTED] Subject: [PEN-L:15935] Journal of Economic Perspectives A while ago the _JEP_ had a short symposium on "Austrian" economics: Harvey Rosen wrote a sympathetic critique of the Austrian school, and Leland Yeager responded. This seemed to work: communication was accomplished. The selection of Harvey as someone definitely in the establishment but not unsympathetic to the Austrian point of view proved a good way to get Austrian concerns and views in front of the _JEP's_ readership. The selection of Leland to comment prevented the symposium from collapsing into being just Harvey Rosen's view of Austrian economics. Should the powers-that-be at the _JEP_ decide that it is time to do the same thing for "Radical" economics, who should play the role of Harvey Rosen? Who should play the role of Leland Yeager? Brad DeLong
[PEN-L:4260] request for book
I had such good luck with my last request of this kind, I will try again. This one will be harder: Does anyone have a copy of Marxism and Materialism by D.-H. Ruben (Humanities Press, 1977) that they would be willing to sell me? Thanks, Fred MOseley
[PEN-L:3904] Krause
A strange request: does anyone have a copy of Money and Abstract Labor by Ulrich Krause (1982) they would be willing to sell me. It is long our of print and I have been unable to obtain a copy any other way. If so, please send a message directly to me: [EMAIL PROTECTED] Thanks, Fred
[PEN-L:3848] trip to New Orleans?
Anyone out there interested in attending the Southern Economic Association meetings in New Orleans next November 18-20 and perhaps organizing a "radical" session? I have been asked by John Seigfreid of Vanderbilt, the incoming President of the SEA who is in charge of the program, to organize such a session. Seigfried mentioned the subject of "what's left of Marxism?", but is open to any subject. The session would consist of 3 papers. Seigfried has promised to enlist the discussants, if necessary. If you are interested, please send me a message, including your ideas about other possible participants, as soon as possible directly to me at: [EMAIL PROTECTED] Thanks.
Re: URPE summer conference
Hi Teresa, The dates of the URPE Summer Conference are August 20-23. Location: a different camp in Connecticut (I forget the name). back to pony country. may Camp Sequoia burn to the ground! Cheers, Fred Moseley
