miscalculation
How to explain the dramatic opposition of the French, German, Russian alliance against the US war drive? Two futher thoughts 1) there is a silent fouth member, known best through Russian contacts - China. It will not cast a veto but its position is consistently cautious and quietly unfriendly to US hegemonism. Its long term good will may be useful. They know they really have an alliance of 4 significant states. 2) All the analysts had predicted the France would fall into line eventually as it did just before the Gulf war. In order to make this more probable the US, and Britain emphasised the inevitability of the war. The US implied that a UN endorsement was not necessary. This was reasoned to make it more likely that France would eventually concur, while Britain could be soft cop and run around finding a formula which the French would endorse so they would not feel isolated. However the calculations may now go the other way. France has seen enough signs that certainly Blair, and maybe Bush will have problems without UN endorsement. Doubts about a split in the Atlantic alliance now potentially cause greater instability for the US-UK axis than for their opponents. Why do I suggest this? The US are persisting with the line that the war is inevitable and they don't mind about UN endorsement anyway. But I get the impression there is not only anger that US hegemonism should be defied so openly, but also shock and surprise. Downing Street today at first flatly denied there was a Franco-German plan - not believing that they could produce a plan without first showing it to the USA and to Britain. A spokesperson spluttered about the destructiveness of the French initiative. The anti-hegemonist bloc has clearly thought ahead about the scenario of the US going to war without UN endorsement. It has calculated that it can live with that risk more comfortably in fact than the hegemonist bloc of Bush and Blair. The latter have miscalculated and have no immediate answer but to say 'we are going ahead anyway, despite the fact that could intensify their problems. They have no exit strategy, France and Russia do. That weakens the position of the USA and the UK in ways they have not calculated. I suggest Chris Burford London
Re: Miscalculation
James Devine wrote: >(1) how does Shaikh measure the rate of profit? does he include the wages >of unproductive labor as part of the numerator, as he does in other >research? if so, I can't think of any reason why his "Marxian rate of >profit" (in Fred Moseley's terms) would be correlated with the stock market. He uses NIPA corporate profits. >(2) in my effort to understand the Big Bull market of the 1920s, I argued >that a high and rising Conventional rate of profit (which is close to the >standard business measure) can encourage the stock market to rise for two >reasons: (a) a high profit rate is correlated with high earnings and >dividends; (b) a rising profit rate is connected with a redistribution of >income toward the classes that can afford to engage in stock-market >speculation and are more likely to engage in it, raising the demand for >stocks. Similar arguments could help us understand the Big Bull market of >the 1990s, though there are other reasons, such as corporations' buy-back >of their own stock. The latter might be partly explained by their abundant >profitability (part of the rising profit rate), along with their efforts to >avoid take-over bids. And shareholders demand very high hurdle rates, meaning that corporations are urged to buy their own stock with free cash flow rather than waste it on capital expenditures promising unsatisfactory (though still positive) rates of return. Doug
Re: Miscalculation
At 18:04 30/11/97 +0001, Michael P. wrote: >So long as prices remain somewhat linked to values the price system gives >capitalists relatively good information about the underlying structure of >the system. Over time fictitious capital accumulates and with it, prices >lose their relationship with values. __ Since I don't understand stock market, my question is an innocent question, and not an attempt to draw anybody in a value theory debate. I don't understand how 'value theory' and its relation to price is related to the prices of stock in the stock market? Is there any relation between stock market ups and downs with the relative price fluctuations of goods and services? Cheers, ajit sinha _ > >As a result, capitalists miscalculate, making the system increasingly >vulnerable. >-- >Michael Perelman >Economics Department >California State University >Chico, CA 95929 > >Tel. 530-898-5321 >E-Mail [EMAIL PROTECTED] >
Re: Miscalculation
Ajit Sinha wrote: >I don't understand how 'value theory' and its relation to price is related >to the prices of stock in the stock market? Is there any relation between >stock market ups and downs with the relative price fluctuations of goods >and services? Anwar Shaikh argues that stock returns are very closely correlated with the rate of profit on new investment. See his Levy Institute Working Paper, No. 146, "The Stock Market and the Corporate Sector: A Profit-Based Approach." Since he believes that profitability is in an upswing, high stock valuations are entirely warranted. Unfortunately, he doesn't have a very convincing explanation of the mechanism underlying this relation, other than something called "turbulent arbitrage." It sounds to me like he's formalized the notion that stock investors react to short-term earnings developments, rather than discounting long-term profit growth, which more or less confirms rather than refutes notions of excess volatility like Shiller's. Doug
Re: Miscalculation
Doug writes: >Anwar Shaikh argues that stock returns are very closely correlated with the rate of profit on new investment. See his ... "The Stock Market and the Corporate Sector: A Profit-Based Approach." Since he believes that profitability is in an upswing, high stock valuations are entirely warranted. Unfortunately, he doesn't have a very convincing explanation of the mechanism underlying this relation, other than something called "turbulent arbitrage." It sounds to me like he's formalized the notion that stock investors react to short-term earnings developments, rather than discounting long-term profit growth, which more or less confirms rather than refutes notions of excess volatility like Shiller's.< (1) how does Shaikh measure the rate of profit? does he include the wages of unproductive labor as part of the numerator, as he does in other research? if so, I can't think of any reason why his "Marxian rate of profit" (in Fred Moseley's terms) would be correlated with the stock market. (2) in my effort to understand the Big Bull market of the 1920s, I argued that a high and rising Conventional rate of profit (which is close to the standard business measure) can encourage the stock market to rise for two reasons: (a) a high profit rate is correlated with high earnings and dividends; (b) a rising profit rate is connected with a redistribution of income toward the classes that can afford to engage in stock-market speculation and are more likely to engage in it, raising the demand for stocks. Similar arguments could help us understand the Big Bull market of the 1990s, though there are other reasons, such as corporations' buy-back of their own stock. The latter might be partly explained by their abundant profitability (part of the rising profit rate), along with their efforts to avoid take-over bids. Is this reasonable to pen-lites? (BTW, if the 1990s Bull is mostly the result of high profit rates in the nonfinancial economy, that does not mean that the stock market is always going to stay high. After all, the nonfinancial economy (and its high profit rate) has its own instabilities.) in pen-l solidarity, Jim Devine [EMAIL PROTECTED] & http://clawww.lmu.edu/1997F/ECON/jdevine.html "The only cause of depression is prosperity." -- Clement Juglar.
Re: Miscalculation
Michael Perelman wrote: >So long as prices remain somewhat linked to values the price system gives >capitalists relatively good information about the underlying structure of >the system. Over time fictitious capital accumulates and with it, prices >lose their relationship with values. When, where, how? We've had plenty of fict val accumulation, but has the price/value relationship gotten out of whack? Doug
Re: Miscalculation
My understanding of value theory is relevant to Louis's theory of miscalculation. This relates to Rakesh's earlier request that I say something about ficititious capital. Marx's value theory, as I read it, tells us what the system MUST do to remain coherent. So long as prices remain somewhat linked to values the price system gives capitalists relatively good information about the underlying structure of the system. Over time fictitious capital accumulates and with it, prices lose their relationship with values. As a result, capitalists miscalculate, making the system increasingly vulnerable. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Miscalculation
There's an interesting article in the NY Times today about the financial crisis in East Asia. It offers best-case and worst-case scenarios: "So far, though, none of that has compensated for a series of huge miscalculations that has mired Tokyo in economic trouble since 1991. A sudden collapse of the kind that afflicted the smaller Asian economies seems highly unlikely. "Nonetheless, with every bit of economic evidence suggesting things in Japan could worsen before they improve, Washington and the markets are awash in gloomy visions in which a panic in Japan -- or even Japanese efforts to quell one -- could leap the Pacific." Reading this, it suggests that the capitalist class is not omniscient. It can, as the article admits, "miscalculate." When it comes to matters of war and economic crisis, it is wrong to assume that it will always make the right decision. The two World Wars and the Great Depression are the best examples of how miscalculations can escalate out of control when the bourgeoisie is operating in difficult times. We are used to second-guessing our own miscalculations as socialists and progressives. How we screwed up in the USSR, Cuba, Nicaragua, etc. Perhaps it would be useful to keep in mind that the bourgeoisie has its own "vanguard party", namely the economists and politicians who try to coordinate and defend the class interests of global capital. When global capital has plenty of room to maneuver, such as it did in the period from 1945 to 1970, it tends to look wise and omniscient. When times get tough, there will be more and more miscalculations that can spin out of control. Trotsky's "History of the Russian Revolution" has an interesting passage which delves into the miscalculations of the Czarist court. Looking back in retrospect, you can observe all the mistakes that it made that led to its being booted from power. What was the explanation? Stupidity brought on by in-breeding, like the British royalty? No, the explanation is that in a pre-revolutionary crisis, there will be qualitatively more opportunities for a ruling class to make the wrong decision. This leads me to an observation on the running squabble between Rakesh and Jerry Levy with Doug Henwood about the appropriateness of value theorists as a guide to the immanent collapse of the capitalist system, or conversely its permanent stability. The problem is that this literature seems to bracket politics out in a way that is entirely inappropriate to understanding the capitalist system. One of the problems of trying to extrapolate a crystal ball from Marx's Capital is that the subject matter of the book is the capitalist system in its pure form. If you view this work as having the capability of predicting general economic collapse, you are misusing it. Perhaps the obsession with mathematics on the part of value theorists is an expression of the desire to find a "scientific" method of predicting depressions, like the meteorologists who predict tornadoes or the seismologists who predict earthquakes. Depressions and wars are not like earthquakes or tornadoes. They are not natural disasters. They are the result of underlying economic contradictions that can have multiple variant outcomes. An important factor in the outcome is psychology of the ruling classes, the fighting mood of the working class and its organizations, etc. Nobody can predict the outcome of the current economic woes. I tend to discount "catastrophism" because I have been hearing worse-case scenarios for the past 20 years or so and capitalism always seems to end up on its feet. The only thing that I am inclined to believe at this point is that "globalization" theorists are starting to look as dated as postmodernism, analytical Marxism and all the other intellectual fads of recent years. When Robert Rubin tells the Japanese what they should do about their economy, what is it that gives him this authority? Clearly it is the economic leverage of America's financial reserves. But behind this is armed might of the American state, "bodies of armed men" as Lenin would put it. The United States has a military presence in East Asia that is a constant reminder of who can give orders to who. Economic nationalism based on a pecking order of capitalist states is as real as it was a century ago. Louis Proyect
