At 8:32 AM 1/21/97, Paul Altesman wrote:
> a) Stock buybacks do represent a shift from productive curcuits
>to money-as-a-commodity curcuits (and rivals the financial institutions on
>"their" turf). Mostly, the M&A funds do the same (i.e. they commodify asset
>control, although we will hear a lot of rationalizations over economies of
>scale, synergies, x efficiencies etc). To society, there are leakages from
>productive capital, but to the productive firms they are an effort inter
>grate financial roles (and profits) into their orbit (Japanese-style would
>be their dream??).
But the Japanese system gives far less importance to financial markets in
the constitution of ownership & control than the Anglo-American model.
Cross-ownership and bank power make for tighter, less volatile relations.
Obviously, partisans of Japanese deregulation would argue that what Japan
needs is more volatility, American style.
> b) The increased leakages to dividends were also triggered by
>the struggle with financial capital - a "defensive" move to prevent
>takeovers, etc. But the funds are mainly sent into capitalist consumption
>(except for the fraction capitalists re-invest).
Mainly/fraction? How come you think the stock market is climbing?
> - Financial capital has built on its gains through bringing
>productive assets into the money-as-money curcuits. But so far shows only
>sporadic desire to move into the productive circuit itself (Patrick do you
>see this differently?). Therefore there seems little likelihood that there
>will be a finance-led revival of the productive sector in N.Amer. (never
>mind a Hilferding-style structuring).
The consensus of the US bourgeoisie is that the productive sector is just
fine - that the acid of competition has worked just as advertised, and the
portions of U.S. manufacturing that survived the last 20 years is in pretty
fine shape.
>With finance capital retaining its
>funds and with productive capital shifting its funds to the finance sector,
>there is a real chance of an overheating\meltdown scenario
Another optimist.
> -The international sector is likely to see continued squeezes from
>the U.S. money circuit (assuming U.S, finance can continue to successfully
>draw on the enormous political control the now enjoy and translate it into
>favorable policies). U.S. productive capital, excluded from the key parts
>of the E Asia boom ("no one is making money in China"), will try to keep up
>with financial capital, obviating the possibility of them playing a
>transformative role abroad.
You make U.S. industry sound sicker than it is. Firms like GE are
flourishing. No one may be making money in China, but they probably will,
and the rest of the region isn't in such bad shape either. Profit rates are
high - no surprise really, since it's only the highest-profit projects that
are invested in. Margaret Blair did estimates of what Jensen called "free
cash flow" - the money firms can't invest for a return higher than the cost
of capital - at the firm level for the 1970s and 1980s. The sharp rise in
real interest rates meant that firms' cost of capital had risen, thereby
generating a rise in free cash flow - i.e., profits that couldn't be
reinvested at a decent rate of profit. Jensen argued that loading up firms
with debt would transfer the FCF to Wall Street rather than leave it in
management's hands to waste on things like investments, employees, and
perks. Debt proved an inflexible (though effective) instrument for doing
that, but stock buybacks and M&A have done just fine as substitutes.
And some of this capital transferred from nonfinance to finance ends up as
consumer credit, capitalized wages, that workers use to compensate for
stagnant incomes. Then they pay back 18% of their after-tax income in debt
service....
Doug
--
Doug Henwood
Left Business Observer
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