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: Re: Re: Rates of Profit: Recent Estimates
How much do you think that profit rates have been affected by the Carter-Reagan-Bush-Clinton-Bush overthrow of the New Deal? Or how much lower would profits be if business had to contend with the same union-regulatory-judicial climate of the earlier period? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Re: Rates of Profit: Recent Estimates
At 15/01/03 07:08 -0500, Fred Moseley wrote:
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
Yes I certainly was thinking of the inflow of foreign capital as well as
the large current account deficit. But I was keeping the door open about
the possibility of some other ways the USA could still benefit by a
transfer of value, even while the dollar exchange rate falls.
I do not know the detailed possibilities well enough. But with the size and
the integration of the US economy, if the exchange rate of the dollar falls
enough it could be very competitive could it not? in a limited world
market, and - this might be the crucial point - keep its economy turning
over relatively better than other countries, with overseas demand making up
the shortfall in domestic demand. If this is sufficient then the USA can
maintain its advantage relative to the rest of the world in capital
accumulation: while capital is destroyed preferentially in the rest of the
world, it accumulates further in the USA. This allows the USA to move just
that little bit further ahead in the relative development of the means of
production. This then in turn further devalues the older means of
production in the rest of the world, ("moral depreciation") obliging
capitalists in the rest of the world to sell their products at a lower
price, squeezing their profits, and choking back their ability to
accumulate capital.
The net result would be the USA weathers the storm better than other
countries (it is the comparison that is important) and pulls ahead again so
well that it can allow the dollar to start rising again, attracting a
further inflow of funds.
The overall pattern witll be that the recession will last for a shorter
time in the US and be shallower than in other countries, so that at the end
of the cycle, the USA has an even higher proportion of the total capital of
the world, and relatively even more advanced means of production.
That is my best attempt to put flesh on my speculation.
Regards
Chris
Re: Re: Rates of Profit: Recent Estimates
In a message dated 1/15/2003 7:14:03 AM Eastern Standard Time, [EMAIL PROTECTED] writes: 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. True, though not all of that debt is being serviced or will be repaid. Corporate debt defaults continue to rise and those defaults increase in size. By mid year 2002 - 21 of the 89 bond defaults were over $1bln, the total was $78 bln. Add in the $374 bln in bankruptcies since 2001. And add in all the loan restructuring going on now, where banks are swapping (exchanging) higher interest for lower interest corporate loans in the hopes of deterring further defaults - and you've got a massive and unstable debt overhang. Over $7trln of loan and bond debt was raised since 1996. The stock vs. loan issue is a bit of a chicken and egg thing. Hard to say which precedes which since both are so linked. While, borrowed money was certainly going towards stock buybacks, inflated stock was also being used as currency to acquire corporations (hence, the massive merger increase in the late 90s), and all acquisition deals created more debt. In many cases, notably the largest ones, part of the 'deal' of buying new corporations with stock, coincided with banks providing corporations shiny new credit facilities (mostly in the form of 5-yr loans). For example, 2 year old Global Crossing bought 100 year old Frontier Communications in 9/99. Chase lead a $3bln credit facility in conjunction with that deal that opened 7/99. Though, Chase maintains that the credit facility was not offered in return for the merger deal, they also confirmed that their credit offer was 'contingent' on the Frontier deal closing. They also happened to be Global Crossing's investment bankers on the deal. Borrowing, stock inflation, merging and accounting manipulation are inextricably linked. The main question I have about possible sources of greater stability in global capitalism is the government bail-outs of banks, that has happened all over the world in recent years. This is a way to transferring bad loans from the banks to the government, so the banks' survival is not threatened and hopefully they can start lending again. Of course, the government loses a lot in the process and the taxpayers end up paying the bill, but there is less of a negative effect on the private economy, at least in the short-run. Any thoughts about this important new type of government economic policy? I'm not sure that the government bailing out banks is new - but, with respect to the current level of bank debt, it's an increasingly dangerous practice. During the second half of the 90s: the financial, telecom, energy, manufacturing and health care sectors combined took on about $7trln of loans. $1.7trln in loans were issued to the financial sector itself, on the assumption that their other debtors would remain solvent. That loan volume was on average 6X what it had been during the first half of the 90s, 10X for the energy and telecom sectors. The financial institutions that issued the most loans and have the most exposure are Citigroup and JPMChase (JPMChase moreso). Both have had substantial reductions in their own share values due to loan writedowns (and lawsuits) which have negative effects on both the taxpayer and their shareholders (including employees.) Both rode the post Glass-Steagall repeal wave to gaining investment banking fees in return for offering corporate loans. Both count on the government to keep them afloat even as their debtors sink. Yet, sadly various regulatory commissions in the government are still pushing for banks to lend more - to revive component of the economy. Yesterday, at a Senate Commerce Committee Telecom hearing, chairman of the FCC, Michael Powell (who, incidentally, put on quite a few pounds since last year), stated that the industry would not recover without investor participation - that means first - more bank loans, then - the hope of higher stock values, which he'll be happy to pump. There's just no learning process going on up there and it's pretty scary. Nomi
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 D&L'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 al
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
Doug: > There are capital stock estimates from the BEA, > compiled on the perpetual inventory method (basically > the cumulative sum of investment less depreciation - > it's not based on a census of the K stock). That means you still need to know the asset values in one way or another. Otherwise, you wouldn't know how to depreciate them. Depreciation expense also influences the net income as far as I know. So in the presence of differences in the treatment of inventories and assets, there should be differences between IRS income and GAAP income even when there are no accounting problems. How significant are these differences? Also, do you know what kind of information they use in their compilation of the capital stock estimates? Put differently, where do they get that information from? Best, Sabri.
Re: Re: Rates of Profit: Recent Estimates
Sabri Oncu wrote: Doug wrote: The national income accounts don't concern themselves with assets, tangible or intangible - just current production and income. This is terrible. That means there is not enough information there to calculate the rate of profit. To calculate this, you need some number to plug in in the denominator, don't you? Where does that number come from? There are capital stock estimates from the BEA, compiled on the perpetual inventory method (basically the cumulative sum of investment less depreciation - it's not based on a census of the K stock). The Fed also has capital stock estimates in the flow of funds accounts. Doug
Re: Rates of Profit: Recent Estimates
Doug wrote: > The national income accounts don't concern > themselves with assets, tangible or intangible > - just current production and income. This is terrible. That means there is not enough information there to calculate the rate of profit. To calculate this, you need some number to plug in in the denominator, don't you? Where does that number come from? Best, Sabri
Re: Re: Rates of Profit: Recent Estimates
Sabri Oncu wrote: This is interesting. As far as I know the US is one of the few countries in which financial accounting and tax accounting are separate. As the argument goes, the IRS reports suffer from that they are extremely conservative and almost always backward looking. Moreover, the IRS accounting does not contain much information on the intangible assets, if any. The national income accounts don't concern themselves with assets, tangible or intangible - just current production and income. Doug
Re: Rates of Profit: Recent Estimates
Doug wrote: > In the national income accounts, the first estimates > of profits are based on what corps report to shareholders. > As the IRS tax data becomes available, which is with a > delay of two or three years, BEA uses that to update their > figures when the annual revisions are released every August. This is interesting. As far as I know the US is one of the few countries in which financial accounting and tax accounting are separate. As the argument goes, the IRS reports suffer from that they are extremely conservative and almost always backward looking. Moreover, the IRS accounting does not contain much information on the intangible assets, if any. On the other hand, GAAP reports presumably take into consideration the future prospects of the firms and hence are better sources of information on the performance of a company. I expect that BEA has developed a rules based approach to update their numbers when IRS data becomse available but how "scientific" is their approach is a question I have. Also, assuming that both IRS and GAAP reports are truthful, which one is more relevant for profit calculations? Moreover, I have no idea how one would "correctly" value intangible assets. Best, Sabri
Re: Rates of Profit: Recent Estimates
> Others (Nomi, Doug, etc.) know more about this than > I do, but some large companies massaged their profit > rates (GE, Microsoft) to make them more > stable. Could this have affected the results? Quite possible as earnings management has swelled to new heights in the past decade. Here is an excerpt from a casual article I just found on the net: http://www.people.memphis.edu/~dspice/7120/ec-eq2.html An often-debated contention is that, within GAAP, managers have the power, to a limited degree, to manipulate reported company income. And the manipulation is not always in the direction of higher income. For instance, Kroger in 2001 announced it was restating profits for three prior years due to intentional and inappropriate earnings management that occurred within a company it had purchased, prior to the acquisition. SEC chairman Arthur Levitt recently began a crusade against earnings management activities. One author states that Most executives prefer to report earnings that follow a smooth, regular, upward path. They hate to report declines, but they also want to avoid increases that vary wildly from year to year; its better to have two years of 15% earnings increases than a 30% gain one year and none the next. As a result, some companies bank earnings by understating them in particularly good years and use the banked profits to polish results in bad years. The main reason for this is the belief that stable earnings reduce the perceived risk of a company thereby reducing its cost of capital.
Re: Re: Re: Rates of Profit: Recent Estimates
Michael Perelman wrote: Others (Nomi, Doug, etc.) know more about this than I do, but some large companies massaged their profit rates (GE, Microsoft) to make them more stable. Could this have affected the results? In the national income accounts, the first estimates of profits are based on what corps report to shareholders. As the IRS tax data becomes available, which is with a delay of two or three years, BEA uses that to update their figures when the annual revisions are released every August. It's been a while since I talked with the guy who does this, but I think they're up to 1999 now - so when the revisions come out in Aug 2003, we'll have definitive figures for 2000. They revised down the profits estimates throughout the late 1990s, and I suspect we're in for more of the same with the next batch of revisions. So earnings management should have little effect on the NIPA numbers through 1999. Doug
Re: Re: Rates of Profit: Recent Estimates
Others (Nomi, Doug, etc.) know more about this than I do, but some large companies massaged their profit rates (GE, Microsoft) to make them more stable. Could this have affected the results? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: Rates of Profit: Recent Estimates
Title: RE: Rates of Profit: Recent Estimates Some comments on Fred Moseley's comments. he writes: > 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. < it's probably misleading to talk about any long-term trend in the ROP unless one has data going back to 1900, as D&L do (though there's problems of comparability of data between eras). If anything, there might be a long-cycle upswing, but even that is much weaker than the profit-rate surge of the 1950s-1960s (the "golden age" of profitability). I like Tom Michl's interpretation, though I can't defend it today: he argues that the high profit rates of the "golden age" were the _exception_, not the rule. The kind of incomplete recovery of the ROP we see since 1980 or so was the usual pattern in data previous to the 1950s. > Extending the estimates to 2002 (which is a more appropiate comparison with 1982), as Jim > D. suggests, would lower these %'s further. I think it's a mistake to use recession years as benchmarks. Most of the comparisons are done peak-year to peak-year. > 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. < there are a lot of inconsistencies between different levels of aggregation. The inconsistency referred to above may have resulted because the non-financial corporate business sector in the US in recent decades has been "losing" as US business has shifted away from actually producing something to engaging in financial biz. (By the way, Dean Baker rejects the idea of the "nonfinancial corporate business sector" as a useful empirical concept because it's so hard to draw the line between the financial and nonfinancial sectors these days.) > 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. < tax cuts and the like can also promote the profit rate, as can scrapping that occurs without bankruptcy. cheers, Jim
Re: Rates of Profit: Recent Estimates
Paul wrote: > In today's world, the high's and lows are just more > reduced (for those who live in the core countries). I don't know how significant the correlation is between the interest and profit rates and how related their volatilies are but in 1997 I ran a statistical study on the US interest rates from 1980 to 1997. Basically, I took a number of key US rates, like the 2 and 10 years rates and ran an I-GARCH as part of a larger project. Volatilies almost monotonically came down in this period. On the other hand, my intuition (unbelievable, I used that bloody word that I hate) tells me that stock return volatilies increased from earlier periods. Best, Sabri
Re: Rates of Profit: Recent Estimates
At 13/01/03 23:27 -0500, Fred Moseley wrote: 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 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? Chris Burford
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: Re: RE: Re: RE: Rates of Profit: Recent Estimates
Title: RE: [PEN-L:33730] Re: RE: Re: RE: Rates of Profit: Recent Estimates I wrote: >it's possible to get disaggregated figures and get rid of the >software component. Doug asks: Why would you want to do that? Software is part of the capital stock, isn't it? And adding machine, a linotype machine, and a typewriter would be part of the capital stock; software lets a general-purpose computer do all those things better than the originals. Is it the noncorporeality that's the problem? I reply: I thought that the phrase "if one wants to" was implicit at the end of the sentence, given the context (a reply to Michael Perelman). I agree that _in theory_ software is part of the "capital stock" (a labor-produced means of production) but in practice its rate of depreciation is so high that it shouldn't be counted as part of the fixed capital stock. Anyway, it depends on what one's purpose is. It makes sense to do calculations with and without software included, in order to do sensitivity analysis (i.e., to see if the results change). Jim
Re: Re: RE: Re: RE: Rates of Profit: Recent Estimates
- Original Message - From: "Doug Henwood" <[EMAIL PROTECTED]> To: <[EMAIL PROTECTED]> Sent: Friday, January 10, 2003 3:57 PM Subject: [PEN-L:33730] Re: RE: Re: RE: Rates of Profit: Recent Estimates > Devine, James wrote: > > >it's possible to get disaggregated figures and get rid of the > >software component. > > Why would you want to do that? Software is part of the capital stock, > isn't it? And adding machine, a linotype machine, and a typewriter > would be part of the capital stock; software lets a general-purpose > computer do all those things better than the originals. Is it the > noncorporeality that's the problem? > > Doug "We pre-suppose labour in a form that stamps it as exclusively human. A spider conducts operations that resemble those of a weaver, and a bee puts to shame many an architect in the construction of her cells. But what distinguishes the worst architect from the best of bees is this, that the architect raises his structure in imagination before he erects it in reality. At the end of every labour-process, we get a result that already existed in the imagination of the labourer at its commencement." http://growthconf.ec.unipi.it/papers/Steedman1.pdf Ian
Re: RE: Re: RE: Rates of Profit: Recent Estimates
Devine, James wrote: it's possible to get disaggregated figures and get rid of the software component. Why would you want to do that? Software is part of the capital stock, isn't it? And adding machine, a linotype machine, and a typewriter would be part of the capital stock; software lets a general-purpose computer do all those things better than the originals. Is it the noncorporeality that's the problem? Doug
RE: Re: RE: Rates of Profit: Recent Estimates
Title: RE: [PEN-L:33721] Re: RE: Rates of Profit: Recent Estimates _Of course_ it's very difficult to measure the capital stock (K), but (1) Dumenil and Levy and the BEA are quite conscious of the index-number problems of this task; (2) D&L don't use it as part of a neoclassical theory of production and distribution, where the problems of measurement of K are paramount; (3) the various measures of the rate of profit don't show markedly different trends or cycles; and (4) the various measures of the rate of profit can play a useful role in a plausible story of the dynamics of the US economy. Thus, I think it would be a mistake to jump from measurement problems into empirical nihilism. The various theories we spin are doubtful, too, so it's good to have some empirical endorsement. (BTW, almost all statistics are subject to doubt: is it really valid to treat each unemployed worker as equal to all others and then add them all up to get the total number of unemployed? Aren't some people more unemployed than others?) Finally, it's important to remember that no theoretical or empirical analysis can give the "final word" on any subject. Rather, every analysis is (and should be) subject to empirical or theoretical criticism. But merely rejecting empirical data or the theory won't wash. The only way to trump an analysis to is to provide a better analysis. Software is currently counted as part of the capital stock (which may explain part of the reason why K depreciation rates have surged), but it's possible to get disaggregated figures and get rid of the software component. Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine > -Original Message- > From: Michael Perelman [mailto:[EMAIL PROTECTED]] > Sent: Friday, January 10, 2003 9:40 AM > To: [EMAIL PROTECTED] > Subject: [PEN-L:33721] Re: RE: Rates of Profit: Recent Estimates > > > To beat on a not yet dead horse, of the major problems in estimating a > rate of profit is the denominator -- the capital stock. Most of the > debates center around the measurement of total profits, but > the capital > stock is the truly difficult part to measure. > > In recent decades, investment has been shifting from > long-lived capital > goods and buildings to capital goods of a very uncertain lifetime. I > believe that even software is now suppose to be part of the > capital stock, > but I'm not sure. > > -- > Michael Perelman > Economics Department > California State University > Chico, CA 95929 > > Tel. 530-898-5321 > E-Mail [EMAIL PROTECTED] > >
Re: Re: RE: Rates of Profit: Recent Estimates
Michael Perelman wrote: In recent decades, investment has been shifting from long-lived capital goods and buildings to capital goods of a very uncertain lifetime. I believe that even software is now suppose to be part of the capital stock, but I'm not sure. It's now treated as an investment; it used to be treated in the NIPAs as a business expense. How do you depreciate software? What is its useful life? In theory, it can run forever - but pressures to upgrade can render it obsolete in a year or two. And what about all that pirated software out there? Is that part of the capital stock too? Doug
Re: RE: Rates of Profit: Recent Estimates
To beat on a not yet dead horse, of the major problems in estimating a rate of profit is the denominator -- the capital stock. Most of the debates center around the measurement of total profits, but the capital stock is the truly difficult part to measure. In recent decades, investment has been shifting from long-lived capital goods and buildings to capital goods of a very uncertain lifetime. I believe that even software is now suppose to be part of the capital stock, but I'm not sure. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: Rates of Profit: Recent Estimates
Duménil & Lévy are excellent people and scholars. Their research on the (conventional) rate of profit in the US is ground-breaking. (What Fred Moseley calls the "conventional" rate of profit is a measure of the kind of profit rate that matters most to business. It differs from the "Marxian" rate of profit that includes the wages of unproductive labor-power in the numerator as part of surplus-value and excludes them from costs and the denominator (along with some other adjustments).) My interpretation of their work (and others') is that the long fall in the rate of profit up to the early 1980s is part of the process (along with stagflation) that provoked the one-sided class war of the last 25 years or so. This has been seen in the victory (so far) of the neo-Liberal policy revolution (Reaganism, following Pinochetism and Thatcherism and followed by Bush/Clinton/Bushism) which is dismantling what existed of the welfare state and feeding the rich and the military. This has led to an incomplete recovery of the rate of profit up to 1997. I interpret the incomplete recovery in terms of (1) increased international competition, including unused capacity; and (2) the fact that booming CEO salaries aren't counted as profits. The neo-Liberal policy revolution around the world has depressed wages and working-class government benefits, encouraging the "underconsumption undertow" (chronically inadequate workers' consumer demand). Unlike in classical underconsumption theories, this does not mean that the economy automatically sinks into depression (though that has happened in many countries). Other kinds of spending can replace working-class consumer spending or workers can borrow, allowing temporary booms. I argue that the boom of US GDP growth continued after the profit rate fell starting in 1997 because of credit expansion, i.e., increasing corporate and personal debt accumulation. This corresponds to the US external defict. However, the increasing debt burden -- and the increasing industrial capacity -- meant that the economy was prone to shocks such as the stock market decline of 2000 and after. Thus, the 2001 recession. Of course, once the recession started, that depressed profit rates further, discouraging capitalist accumulation. For a more complete story, see http://bellarmine.lmu.edu/~jdevine/talks/newOhio.htm. Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine -Original Message-From: Paul_A [mailto:[EMAIL PROTECTED]]Sent: Friday, January 10, 2003 6:14 AMTo: [EMAIL PROTECTED]Subject: [PEN-L:33711] Rates of Profit: Recent EstimatesThere is a 'must-see' article in URPE's RRPE, Fall issue (latest?) by Dumenil and Levy. The most salient point is that they see a LONG RUN upturn in the rate of profit since 1982 which was the bottom of a 34 year decline. So far, as of 2000, there has only been a partial recovery (since 1982 profit rates have returned roughly to the 1965 level). This is long wave analysis, so of course there are ups and downs within these trends. They see changes in "productivity" (technical change) as driving much of the downswing and now the upswing, but there are also shifts in the share of profits. So, between the lines, they would seem to point to falling rate of profit theory although the article is deliberately limited to "the stylized facts". They consciously draw on Shaikh, Tonak and Moseley.To bring out the trends D & L rely on removing from consideration very capital intensive industries such as power, communications and transport on the grounds they are a special case. They also use 1956-65 as the base years.Of course the implications are central: are we well into a long upswing in profit rates that, very broadly speaking, might last for another 15 years or so? I would love to hear what people think of the article (especially Fred Moseley and Jim Devine). Is the difference in emphasis with Moseley largely because they now bring more recent data into play?I recall that the paper was to be presented at the ASSA LAST year. Does anyone know how the discussion went?Paul A.P.S. Who are these French fellows Dumenil and Levy? They seem to be quite prolific. At 03:41 PM 1/9/2003 -0800, you wrote: [was: RE: [PEN-L:33695] Re: Re: quesion from Michael Yates] > Fred B. Moseley wrote: > >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." Doug writes: > So where's the ROP these days? according to the SURVEY OF CURRENT BUSINESS (http://www.bea.doc.gov/bea/ARTICLES/2002/09September/0902CorpProfit.pdf), what Fred calls the "conventional rate of profit" for the non-financial corporate sector has fallen pretty drastically in recent years. Its cyclical pe
Re: Re: Rates of Profit: Recent Estimates
In a message dated 1/10/03 6:35:39 AM Pacific Standard Time, [EMAIL PROTECTED] writes: >P.S. Who are these French fellows Dumenil and Levy? They seem to be >quite prolific. http://www.cepremap.ens.fr/~levy/index.htm -- The Marxism list: www.marxmail.org Thanks Lou. I immediately thought about the time frame of 1956 - 65 and the invention and implementation of the transistor. That is the time it takes to build the infrastructure to mass produce a given technological application, which becomes obsolete after you have built the factories and distribution networks. Dad use to make us go to the Drug store and test his vacuum tubes because we had the only stereo in the neighborhood. Dad became an electrician at Ford Motor Company - a skilled tradesman, and was the first black face to adorn the UAW skilled trades journal. The article was called "The Reading Man." Dad built the stereo from reading electronic magazines and uncle Leroy - not a pun, built the cabinet and later migrated to Ghana to teach at one of their newly established universities. Leroy was what then was called a Pan Africanist - early 1960s. An upswing in the rate of profit means the qualitative application of a new production process and is not an upswing if ones curve begins with Henry Ford and the mass application of the Singer Sewing Machine production process called the assembly line. Let me read the article. Thanks Again. Melvin P.
Re: Rates of Profit: Recent Estimates
P.S. Who are these French fellows Dumenil and Levy? They seem to be quite prolific. http://www.cepremap.ens.fr/~levy/index.htm -- The Marxism list: www.marxmail.org
