>Fikret Ceyhun wrote: > >>One other possible explanation for low capital output ratio in the United >>States is that K/Ys are correlated with Marx' concept of the organic >>composition of capital. When organic composition of capital is low then >>the rate of profit is high, assuming that the rate of surplus value is the >>same (or not lower). Since statistically profit rates are higher in the >>U.S. then OCC must be low. > >Well, that's what I was thinking, though obviously I was using bourgeois >statistics, doubtless to the consternation of Jerry Levy. But we're talking >about the country that's been the dominant capitalist power for almost a >century. Isn't the OCC supposed to rise over time? > > >Doug > Here,Doug presents a pardox by saying: "But we're talking about the country that's been the dominant capitalist power for almost a century. Isn't the OCC supposed to rise over time?" I will try to untangle this paradox. 1. The OCC has been rising for the United States since the 1950s. According to statistics that I have compiled from FORTUNE 500 LARGEST INDUSTRIAL CORPORATIONS, the K/L ratio in real dollars rose from $14,000 in 1954 to $232,000 in 1993. Similar rise is observed in K/L for the 50 LARGEST INDUSTRIAL CORPORATIONS, from $70,000 in 1959 to $281,000 in 1994. The OCC does rise over time for the US as well as for other OECD countries. From this we cannot generalize for every sector, but I believe it is a general tendency, except in services. 2. The cross-country statistics cited by Doug for 1996. I do not know whether K/Y is declining for the US over long period or just the short period. If the K/Y is declining for some time, then the answer should be sought in "Hollow Corporations." As BUSINESS WEEK says, "Large segments of American industry. . . have been abandoning manufacturing in the US. They have, in effect, become collections of hollow corporations that serve as assemblers and distributors for components or entire products made abroad. This trend is sapping the vitality and undermining the future of US industry. . . . The message is simple. US producers can compete more effectively with their foreign rivals by making an ironclad commitment to manufacturing. By investing in the US rather than abroad and moving as quickly as feasible to computer-integrated manufacturing, they can regain their comparative advantage in quality and cost." 3. Marx's counter-tendencies: I appologize for long digression here, but it is important to make my point clear. As we know capitalism as a social organization is a class society and the class relationship between capital and labor is fundamentally antagonistic, and this antagonism leads to class struggle over the distribution of surplus value as well as working rules. At the center of capitalism lies production for market, and capitalist production is driven by profit. The search for profit is the primary occupation of the owners of capital. Competition for profit is the driving force of capital accumulation, and the rate of profit is an important gauge for accumulation and investment decisions in various industries and regions. Since capital accumulation is motivated by profitability, declining profitability means declining rates of accumulation and increasingly fierce competition among (national and international) capitalists for markets, materials and cheap labor-power. However, capitalism is a powerful and highly flexible social structure. Capitalists never lay dead, and they have strategies in their possession to deal with a profitability crisis. When they succeed in doing this, profitability may return to revive their ability to invest in new means of production. According to Mandel, " The rate of profit can fluctuate under the influence of countervailing forces. Constant capital can be devalorized, through 'capital saving' technical process, and through economic crises. The rate of surplus-value can be strongly increased in the short or medium term. . . . capital can flow to countries (e.g. Third World ones) or branches (e.g. service sectors) where the organic composition of capital is significantly lower than in the previously industrialized ones, thereby raising the average rate of profit." Shaikh says that "various counteracting influences act to slow down and even temporarily reverse the falling rate of profit. Higher intensity of exploitation, lower wages, cheaper constant capital, the growth of relatively low organic composition industries, the importation of cheap wage goods or means of production, and the migration of capital to areas of cheap labor and natural resources can all act to raise the rate of profit by raising the rate of exploitation and/or lowering the organic composition of capital. But precisely because the counter-tendencies operate within strict limits, the secular fall in the rate of profit emerges as the dominant tendency ." According Foley , Marx had five counter tendencies to the falling rate of profit: "The First counter tendency listed by Marx is in fact the possibility that the rate of exploitation may rise as a result of a fall in the value of labor-power with the rising productivity of labor. This possibility has already been analyzed by Marx in his discussion of relative surplus value. . . . but there is certainly the possibility in real capital accumulation for the basic pattern of rising labor productivity, a rising rate of surplus value, a rising real wage, and a falling rate of profit that seems to be inherent in Marx's analysis. The Second counter tendency Marx lists is the depression of wages below the value of labor-power in cases in which capitalist can gain a temporary advantage in their bargaining with workers. . . . The Third counter tendency is considerably more important. It is the fact that the general increase in labor productivity will lower the value and price elements of constant capital. . .. . The Fourth counter tendency Marx calls relative overpopulation--the emergence of unemployment as workers displaced by technical change. . . . Finally, Marx points out that foreign trade, if it makes available either cheaper elements of constant capital or cheaper means of subsistence, will tend to reduce production costs for capital and sustain the rate of profit." We see from Mandel why the US has low OCC, because the US is the most service oriented economy in the world. Service sector has lower OCC than manufacturing, mining, and agriculture. Also Shaikh sheds light to why the OCC might be low. We also see the samething from Foley's third and last point. 4. Comparing the US with other OECD countries. If the statistics cited are true in the long run, that is, K/Y for the US is lower than her counterparts in competition, then the explanation lies in the Leontief Paradox mentioned earlier by Paul Phillips. That is, according to the paradox, the US is not a capital endowed, as commonly believed, but labor endowed country. Fikret. ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +Fikret Ceyhun voice: (701)777-3348 work + +Dept. of Economics (701)772-5135 home + +Univ. of North Dakota fax: (701)777-5099 + +University Station, Box 8369 e-mail: [EMAIL PROTECTED] + +Grand Forks, ND 58202/USA + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++