The rate of profit and recession
Rakesh: (for example, I have re-read Perlo and Fichtenbaum whom you do not in fact understand, so in your case it first has to be a matter of reading the very theorists whom you think you are defending). CB: So, do you think that Perlo and Fichtenbaum agree with you , you ethical chap , you ? ^^ and I have hurt my brain ^^ CB: I'm sure it will be all better soon. ^^ But I have no interest in an exchange of slogans. ^^^ CB: Are Council Communists really as in touch with regular folks as they make out they are ? Don't you think disdain for slogans is a bit snooty for theoreticians for the working classes ? ^^^ I wish you luck in finding other interlocutors. ^^^ CB: Well , thank you so much. Eat , drink and be merry.
Re: The rate of profit and recession
Charles, I do not know whether science has ethical implications but the practice of science and rational argument depends on ethical commitments--good faith attempts to understand the other side, to consider and carefully engage counter-criticism before launching the same criticism in the same unmodified form again, to recognize the strongest counter-evidence against you (for example, I have openly admitted that I do not have good or any direct evidence that the rise in the s/v no longer neutralized rise in vcc and u/p labor ratio, and I have hurt my brain working through neo Ricardian critiques such as Catephores' and Robert Paul Wolff's--do you understand even one problem in the crude underconsumptionist theory to which you are committed?), and to read the works of your opponents (for example, I have re-read Perlo and Fichtenbaum whom you do not in fact understand, so in your case it first has to be a matter of reading the very theorists whom you think you are defending). Now of course Jim Devine has reached the conclusion that I have not operated ethically in my criticisms of him, and I openly admit to being very confused by what he is saying. I for example don't understand whether his or any overinvestment/modified unconsumption theory can specify a growth rate that would make accumulation somewhat less vulnerable to collapse like a house of cards. I truly don't understand this. But then neither does Shaikh. Fred also read the same unconsumptionism into Jim's theory that I understood it to imply. Jim denies both that his theory his vulgar underconsumption or fosters reformist illusions. Well, you can draw succor from many others who have also read underconsumptionism into Marx as the last word in crisis theory. But I have no interest in an exchange of slogans And that is what I will get with you, not a scientific or even rational argument. I wish you luck in finding other interlocutors. Rakesh
The rate of profit and recession
The rate of profit and recession by Rakesh Bhandari 30 January 2002 17:12 UTC < < < Thread Index > > > Rakesh, Don't you think that in the passage quoted, Marx addresses the questions you had asked ? In addressing the isssues you ask "why" about, Marx gives and "ultimate" why answer. Perhaps the answer to the disagreement here is that you are explaining the "trigger" , which is more of an immediate cause. Marx is addressing the "ultimate" or more fundamental cause. The other questions you pose to Marx's quote are relevant , and no doubt of interest to economists. Rakesh>why is there overaccumulation in the system as a whole? why is >global investment demand not strong and high enough to realize the >surplus value that remains latent in commodities? > > > > > >Karl Marx: "Let us suppose that the whole of society is composed only of >industrial capitalists and wage-workers. Let us furthermore >disregard price fluctuations, which prevent large portions of the >total capital from replacing themselves in their average proportions >and which, owing to the general interrelations of the entire >reproduction process as developed in particular by credit, must >always call forth general stoppages of a transient nature. Let us >also disregard the sham transactions and speculations, which the >credit system favours. Then, a crisis could only be explained as the >result of a disproportion of production in various branches of the >economy, and as a result of a disproportion between the consumption >of the capitalists and their accumulation. But as matters stand, the >replacement of the capital invested in production depends largely >upon the consuming power of the non-producing classes; while the >consuming power of the workers is limited partly by the laws of >wages, p! >artly by the fact that they are used only as long as they can be >profitably employed by the capitalist class. Charles, why do capitalists find at some point in the course of accumulation that it is no longer profitable to employ workers in the expansions of either or both depts and thus limit investment demand (of which variable capital is a component) such that surplus value that has already been produced and lays idle (not all of which by the way is in the form of consumer goods) cannot be realized by way of accumulation? > > The ultimate reason for all real crises always remains the poverty >and restricted consumption of the masses as opposed to the drive of >capitalist production to develop the productive forces as though >only the absolute consuming power of society constituted their >limit." So investment demand falls, the masses are further impoverished and their consumption even more restricted, yet supply had been built up with a view to meeting unmet needs and demands as such which are now however no longer effective because of the drop off of investment demand the explanation for which is the shortage of the surplus value that was actually being produced even as that surplus value had in fact realized. The capitalists no longer believe that it pays to accumulate, investment demand falls off, capital and workers are idled, the masses are thereby impoverished and their consumption further restricted--so yes indeed the ultimate cause of crisis can be said to be the restriction on the consumption of the masses by the adequation of the production to the valorization of capital. The question remains what are the limits to the valorization of capital. Rakesh ^^ CB: As Jim Devine says, because Marx says it doesn't mean whatever. However , if you are claiming to be giving Marx's take on this issue, then you have seemingly transferred what Marx calls the "ultimate reason" into a "penultimate reason" , and posed your own "ultimate reason" in substitute. Fine. But I don't see why you claim that you are doing the analysis as Marx would. You should claim it as Bhandari analysis. That doesn't even mean that Marx wouldn't pose the question that you do, but he doesn't give it the fundamental causal status that you do. Doesn't Marx sound very 2002ish when he says " Let us also disregard the sham transactions and speculations, which the credit system favours." ?
Re: Re: RE: The rate of profit and recession
Come on. We don't need this crap! Rakesh Bhandari wrote: > >[somehow my e-mail program isn't cooperating again. Here's my complete > >message.] > > > >[I thought I started writing a reply to this, but somehow there's no file. > >I'm sorry if anyone received two versions.] > > > >Paul Phillips writes: >The question we were discussing, I thought, was what > > > >that's the problem with Perelman's rule that we can't attach individual's > >names to descriptions of assholery. > > Do you think you are *not* calling me an asshole? > > Rakesh -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: RE: The rate of profit and recession
>[somehow my e-mail program isn't cooperating again. Here's my complete >message.] > >[I thought I started writing a reply to this, but somehow there's no file. >I'm sorry if anyone received two versions.] > >Paul Phillips writes: >The question we were discussing, I thought, was what >explains the drop in profits after 1997 (despite rapidly rising labour >productivity) and which subsequently resulted in a fall in investment >initiating the recession. Your data, at least as I read it, questioned >whether the fall in profits was initiated in production given the stable K/Y >ratio.< > >right, though it's not my data. (It's from the U.S. government's Department >of Commerce.) In fact, in the U.S., the K/Y jelly -- I mean ratio -- was >moving in the wrong direction after 1980 or so in order to explain a fall in >the rate of profit. Though there are other eras which are more "classical" >in appearance (in the sense that excessive capital intensity [fixed K/Y] >explains the profit rate's fall), the period since 1980 or so, like the >period from 1919 to 1929, didn't fit that rubric. but the question remains what the relation of such data are to Marx's variables of vcc, occ, s/v, and U/P labor ratio. > > >The proximate cause of the fall in the rate of profit during the last part >of the 1990s/2000 boom was a fall in the profit share. This in turn was due >to a boom-driven fall in unemployment, going down to 4%, which eventually >raised wages. But why would the underconsumption undertow have kicked in at the point that consumption gains were being generalized? >The boom also pulled up raw materials costs to U.S. >businesses. oil prices skyrocketed but what about a basket of raw materials? and does the timing work out? hasn't the recession grown worse as raw material prices have weakened? > The latter were unable to pass the costs onto consumers as >higher prices because of the high dollar. the high dollar may have also reduced capital costs. > Increased competition from a large >number of places -- including China -- as part of the world-wide race (or >crawl) to the bottom, i.e., competitive austerity and export-promotion put a >squeeze on U.S. profits. Why did this decrease mark ups more than costs? > > >I don't discount underconsumption forces except as an explanation of the >proximate causes of the decline in profitability. Instead, I see them as >working in the background, determining the conditions needed to be met to >allow a sustained boom. Given the "underconsumptionist undertow" resulting >from the one-sided class war in the U.S., the only one way that we could see >a sustained economic boom of the sort that prevailed in the 1990s was to >have either a profit-driven investment boom, a credit-driven workers' >consumption boom, a boom of luxury spending, a surge in U.S. net exports, >and/or a rising government deficit. Given the general stagnation of most >countries outside the U.S., due to the one-sided class wars and >neo-liberalism there, along with the highly valued US$, the penultimate >substitute for consumption growth was ruled out. The neo-liberal policy >revolution ruled out the last one on the list; in fact, the US government's >budget went into the surplus territory. > >So, the boom was based on profit-driven investment and a rise in luxury >spending, each of which were pushed along by the rightward shift in the >income & wealth distributions and the stock-market bubble, plus credit-based >consumer purchases by workers. But all of these created imbalances which >made the boom more and more prone to collapse. Debt accumulation and a more >rapid growth of industrial capacity are the most crucial imbalances. In >addition, these types of spending are especially flaky -- subject to >fluctuations -- compared to income-based workers' consumer spending, so >demand became increasingly subject to fluctuations as it became more >dependent on them. These imbalances make the boom increasing unstable. I don't see how this responds to Fred's point that less mass underconsumption would have made the boom more unstable, more vulnerable to an earlier collapse; moreover, I don't see how this responds to the classical Marxist argument (Grossman, Mattick, Yaffe, Daum, Cogoy, Shaikh, Moseley) that less underconsumption in a downturn may not only not help in overcoming the dowturn, it may exacerbate it. After all, if the overcoming of realization problems depends on the revival of accumulation which in turn depends on the brighter profit prospects generated by the crisis-created cheapening of constant capital and intensifying of the rate of exploitation, how would less underconsumption and less restriction on wages overcome the crisis? > >Toward the end of the 1990s/2000 boom, we saw the possibility of an escape >from the underconsumption undertow, as wages started rising (in the U.S.) >relative to productivity. But given the world political economy of >neo-liberal triumphalism
Re: The rate of profit and recession
>The rate of profit and recession >by Rakesh Bhandari >29 January 2002 20:45 UTC > > > >why is there overaccumulation in the system as a whole? why is >global investment demand not strong and high enough to realize the >surplus value that remains latent in commodities? > > > > > >"Let us suppose that the whole of society is composed only of >industrial capitalists and wage-workers. Let us furthermore >disregard price fluctuations, which prevent large portions of the >total capital from replacing themselves in their average proportions >and which, owing to the general interrelations of the entire >reproduction process as developed in particular by credit, must >always call forth general stoppages of a transient nature. Let us >also disregard the sham transactions and speculations, which the >credit system favours. Then, a crisis could only be explained as the >result of a disproportion of production in various branches of the >economy, and as a result of a disproportion between the consumption >of the capitalists and their accumulation. But as matters stand, the >replacement of the capital invested in production depends largely >upon the consuming power of the non-producing classes; while the >consuming power of the workers is limited partly by the laws of >wages, p! >artly by the fact that they are used only as long as they can be >profitably employed by the capitalist class. Charles, why do capitalists find at some point in the course of accumulation that it is no longer profitable to employ workers in the expansions of either or both depts and thus limit investment demand (of which variable capital is a component) such that surplus value that has already been produced and lays idle (not all of which by the way is in the form of consumer goods) cannot be realized by way of accumulation? > > The ultimate reason for all real crises always remains the poverty >and restricted consumption of the masses as opposed to the drive of >capitalist production to develop the productive forces as though >only the absolute consuming power of society constituted their >limit." So investment demand falls, the masses are further impoverished and their consumption even more restricted, yet supply had been built up with a view to meeting unmet needs and demands as such which are now however no longer effective because of the drop off of investment demand the explanation for which is the shortage of the surplus value that was actually being produced even as that surplus value had in fact realized. The capitalists no longer believe that it pays to accumulate, investment demand falls off, capital and workers are idled, the masses are thereby impoverished and their consumption further restricted--so yes indeed the ultimate cause of crisis can be said to be the restriction on the consumption of the masses by the adequation of the production to the valorization of capital. The question remains what are the limits to the valorization of capital. Rakesh
The rate of profit and recession
The rate of profit and recession by Rakesh Bhandari 29 January 2002 20:45 UTC why is there overaccumulation in the system as a whole? why is global investment demand not strong and high enough to realize the surplus value that remains latent in commodities? "Let us suppose that the whole of society is composed only of industrial capitalists and wage-workers. Let us furthermore disregard price fluctuations, which prevent large portions of the total capital from replacing themselves in their average proportions and which, owing to the general interrelations of the entire reproduction process as developed in particular by credit, must always call forth general stoppages of a transient nature. Let us also disregard the sham transactions and speculations, which the credit system favours. Then, a crisis could only be explained as the result of a disproportion of production in various branches of the economy, and as a result of a disproportion between the consumption of the capitalists and their accumulation. But as matters stand, the replacement of the capital invested in production depends largely upon the consuming power of the non-producing classes; while the consuming power of the workers is limited partly by the laws of wages, p! artly by the fact that they are used only as long as they can be profitably employed by the capitalist class. The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit." http://www.marxists.org/archive/marx/works/1894-c3/ch30.htm
RE: the rate of profit and recession
Charles writes:>>On the below, I don't know if I interpreted your reference to "the counter-acting tendency ...winning" correctly as one of the countervailing influences that Marx lists that prevent the profit rate from falling despite its general tendency to fall. << >I'm not as interested in being true to Marx's posthumously published and poorly edited manuscript as much as I am interested in figuring out how the economy works. The fact is that any increase in the "organic composition of capital" can be counteracted by a surge of labor productivity growth.< >>I took "stock capital" from Marx to be stock market profits as acountervailing influence to the tendency of the rate of profit to fall.<< a lot of stock market profits on simply on paper. In 2000, a lot of people had paper winnings (capital gains) from the stock market. But these can't be realized if everyone tries to realize them, since that drives down the stock price, abolishing the capital gains. The valid stock market prices are based on corporate earnings (real production of surplus-value). Jim Devine
the rate of profit and recession
the rate of profit and recession by Devine, James 29 January 2002 15:49 UTC Jim, On the below, I don't know if I interpreted your reference to "the counter-acting tendency ...winning" correctly as one of the countervailing influences that Marx lists that prevent the profit rate from falling despite its general tendency to fall. I took "stock capital" from Marx to be stock market profits as acountervailing influence to the tendency of the rate of profit to fall. Charles ^^^ I wrote:>>The fixed capital/output ratio continued to fall all the way until 2000 (following its trend from the early 1980s), indicating that labor productivity growth exceeded the rate of growth of fixed capital per worker. The "classical Marxist" theory doesn't seem to work, at least not for this specific example, because the counter-acting tendency was winning.<< CB: >Are you referring to the counteracting tendency termed "increasing intensity of exploitation" ? What about the counteracting tendency " increase of stock capital" in the time period you are discussing ? Was there a big rise in the stock market in this timeframe ?< the rise in labor productivity growth (which, BTW, was not as big a deal as the "new economy" folks alleged) relative to real wages helped raise the rate of exploitation (as measured by the share of profit+interest in the income of the non-financial corporate business sector) until the end of the 1990s, when it started to fall. However, this was not as important as a second trend: labor productivity growth also meant that the ratio of fixed capital to income (K/Y) fell, since the normal rise in the amount of fixed capital per worker (K/L) was out-weighed by the rise in labor productivity (Y/L). The fall in K/Y for this sector was a steady trend after 1980 or so. I don't understand the role of "the increase in stock capital." Jim
RE: The rate of profit and recession
caused by competition from offshore (as claimed by CEOs to explain why inflation was held in check despite falling unemployment -- i.e. in their terms, a leftward shift in the NAIRU), competition that was fueled by a) overaccumulation in competing countries, in particular China; and b) the steady rise in the value of the USD which forced down prices of domestic production in order to remain competitive.< Yes, as discussed above, I'd say that that is a crucial part of the story. It's hard for me to say the extent to which the profit squeeze in the late 1990s was due to these international-competition issues (as Brenner might emphasize) or due to domestic accumulation pulling up costs (as in Marx's volume I, chapter 25, description of the cycle). Perhaps it's impossible to untangle causation quantitatively, so that all we can say is that both domestic and international factors play a role. >(ps. the references to scripture, etc. were not referring to you.)< that's the problem with Perelman's rule that we can't attach individual's names to descriptions of assholery. It sometimes implies that innocent parties feel confused or even insulted by the floating & abstract descriptions. Jim Devine. -Original Message- From: Devine, James To: '[EMAIL PROTECTED]' Sent: 1/29/02 8:51 PM Subject: [PEN-L:22079] RE: Re: : The rate of profit and recession [I thought I started writing a reply to this, but somehow there's no file. I'm sorry if anyone received two versions.] Paul Phillips writes: >The question we were discussing, I thought, was what explains the drop in profits after 1997 (despite rapidly rising labour productivity) and which subsequently resulted in a fall in investment initiating the recession. Your data, at least as I read it, questioned whether the fall in profits was initiated in production given the stable K/Y ratio.< right. Underconsumption was discounted because, as many have noted, consumption expenditure has held up despite the drop in consumer confidence. How then to explain the decline in profits if real wages were not rising faster than labour productivity unless one were to suggest that the intensity of labour was being reduced. My question was really quite simple -- could not the fall in profits been because of a form of inability to realize profits (surplus value) caused by competition from offshore (as claimed by CEOs to explain why inflation was held in check despite falling unemployment -- i.e. in their terms, a leftward shift in the NAIRU), competition that was fueled by a) overaccumulation in competing countries, in particular China; and b) the steady rise in the value of the USD which forced down prices of domestic production in order to remain competitive. (ps. the references to scripture, etc. were not referring to you.)
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: Re: : The rate of profit and recession
[I thought I started writing a reply to this, but somehow there's no file. I'm sorry if anyone received two versions.] Paul Phillips writes: >The question we were discussing, I thought, was what explains the drop in profits after 1997 (despite rapidly rising labour productivity) and which subsequently resulted in a fall in investment initiating the recession. Your data, at least as I read it, questioned whether the fall in profits was initiated in production given the stable K/Y ratio.< right. Underconsumption was discounted because, as many have noted, consumption expenditure has held up despite the drop in consumer confidence. How then to explain the decline in profits if real wages were not rising faster than labour productivity unless one were to suggest that the intensity of labour was being reduced. My question was really quite simple -- could not the fall in profits been because of a form of inability to realize profits (surplus value) caused by competition from offshore (as claimed by CEOs to explain why inflation was held in check despite falling unemployment -- i.e. in their terms, a leftward shift in the NAIRU), competition that was fueled by a) overaccumulation in competing countries, in particular China; and b) the steady rise in the value of the USD which forced down prices of domestic production in order to remain competitive. (ps. the references to scripture, etc. were not referring to you.)
RE: Re: Re: : The rate of profit and recession
Doug writes:>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?< the cuts have already had an effect in the U.S.: they propped up the asset values of housing and the stock market, which has so far prevented the recession from being worse. To my mind, we may have a recovery (in the U.S.), but it won't be fast enough to keep unemployment rates from continuing to rise for a year or two. Further, in line with Godley/Izureta analysis, excessive private-sector debt (and U.S. external debt) and the synchronization of a lot of countries' recessions make it quite likely that this recovery will part of a "Dubya-shaped" process, i.e., a temporary boom that follows a recession and is followed by another (as with the temporary 1981 boom). Private sector debt becomes more important if unemployment continues to increase. -- Jim Devine
Re: Re: Re: : The rate of profit and recession
>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? > >Doug To the extent that the working class prevents the crisis from being resolved on its back, the longer the crisis will endure but the stronger the working class will be, organizationally speaking, to commence even more fundamental inroads into the system. Nothing is predetermined; prediction is strictly impossible. We are all Henwoodians now. I certainly don't think a painless working down of inventories will be enough to stimulate a strong new bout of investment; there has to be more destruction and devaluation of capital to encourage strong new levels of investment among the surviving capitals. There however will doubtless be a US recovery (some of that trillion dollars will come out of the money markets, assets will rise and investment on that basis) but I doubt that recovery will be strong enough to compensate for weakness in the system as a whole. If the crisis is not protracted in the US, we'll get bitten in the butt before long as a result of financial crises in Japan and Asia. rb
Re: Re: : The rate of profit and recession
>Jim, > >The question we were discussing, I thought, was what explains the >drop in profits after 1997 (despite rapidly rising labour productivity) >and which subsequently resulted in a fall in investment initiating the >recession. Your data, at least as I read it, questioned whether the >fall in profits was initiated in production given the stable K/Y ratio. >Underconsumption was discounted because, as many have noted, >consumption expenditure has held up despite the drop in consumer >confidence. How then to explain the decline in profits if real wages >were not rising faster than labour productivity unless one were to >suggest that the intensity of labour was being reduced. > >My question was really quite simple -- could not the fall in profits >been because of a form of inability to realize profits (surplus value) >caused by competition from offshore (as claimed by CEOs to >explain why inflation was held in check despite falling >unemployment -- i.e. in their terms, a leftward shift in the NAIRU), >competition that was fueled by a) overaccumulation in competing >countries, in particular China; why is there overaccumulation in the system as a whole? why is global investment demand not strong and high enough to realize the surplus value that remains latent in commodities? yes there is an outbreak of global competition but why? and since on the whole I would imagine that Chinese goods are non competing with US production why wouldn't such cheaper exports lower costs as much lower mark ups? Why should the consequence of big bad Chinese competition be lower profitability for US capital? Note that the solution to the crisis implied by your analysis of it points to protectionism and nationalism; you're a big free trade critic, right? > and b) the steady rise in the value of >the USD which forced down prices of domestic production in order >to remain competitive. But the strong dollar may not have only undermined the realization of surplus value; in fact realization may have been aided by the higher rate of accumulation made possible by the availability of cheaper capital as a result of the high dollar. >(ps. the references to scripture, etc. were not referring to you.) Yes, yes, I give no reasons in my posts. Rakesh
Re: Re: : The rate of profit and recession
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? Doug
Re: : The rate of profit and recession
So Bush is attempting to build confidence by some fiscal stimulus with future regressive tax savings by cutting into any kind of social welfare. Social darwinist military Keynesianism. Rakesh Actually I am not quite right here. Bush's attempt to restore benefits to legal non citizen residents was an interesting, unexpected move which may indeed buy him votes. rb
Re: : The rate of profit and recession
Jim, The question we were discussing, I thought, was what explains the drop in profits after 1997 (despite rapidly rising labour productivity) and which subsequently resulted in a fall in investment initiating the recession. Your data, at least as I read it, questioned whether the fall in profits was initiated in production given the stable K/Y ratio. Underconsumption was discounted because, as many have noted, consumption expenditure has held up despite the drop in consumer confidence. How then to explain the decline in profits if real wages were not rising faster than labour productivity unless one were to suggest that the intensity of labour was being reduced. My question was really quite simple -- could not the fall in profits been because of a form of inability to realize profits (surplus value) caused by competition from offshore (as claimed by CEOs to explain why inflation was held in check despite falling unemployment -- i.e. in their terms, a leftward shift in the NAIRU), competition that was fueled by a) overaccumulation in competing countries, in particular China; and b) the steady rise in the value of the USD which forced down prices of domestic production in order to remain competitive. (ps. the references to scripture, etc. were not referring to you.) Paul Phillips, Economics, University of Manitoba Economics, University of Manitoba
Re: : The rate of profit and recession
> > > >CB: Yea, realization problems. In this passage , Mattick is with >us, isn't he ? Even if he discusses "realization of surplus value by >accumulation", his conclusion is dependent upon "insufficient >demand" by consumers of commodities from Department I, insufficient >mass demand or consumption. No the problem is that though surplus value had indeed been realized, it was proving insufficient as a mass to encourage capitalists to undertake the level of investment by which surplus value could again be realized. Difficulties in the realization of surplus derived from difficulties in the production thereof. Moreover, while it appears that the investment demand is murdered by high interest rates, the Fed in fact raise interest rates as it finds that attempts to pump liquidity in the system are leading more to (asset) inflation and the fragility to which that gives rise rather than real investment which falls off as a result of a decline in the rate and mass of profit. 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. To the extent that fiscal policy adds to pessimism about future profits it can encourage the further retrenchment rather than the making of new investments. So Bush is attempting to build confidence by some fiscal stimulus with future regressive tax savings by cutting into any kind of social welfare. Social darwinist military Keynesianism. The business class thus looks to the state first and foremost to turn the world market to its national advantage and to beat the hell out of labor not for any good *reason* but out of frank and brute defense of privilige and possession. They have the perfect man for the job. Rakesh
Re: Re: The rate of profit and recession
>Why undermine a perfectly informative discussion with such personal sniping? >Please stop. We seem agreed that capitalists did not undertake the level of investment needed for surplus value to have been realized. The question is why. There are several answers on the table: (1) underconsumption. The level of investment needed for surplus value to have been realized would have added to productive capacity especially of consumer goods for which there was no forseeable effective demand especially since wages had been restricted even in the preceding prosperity and boom phase. Moreover, the very accumulation of capital would have itself diminished consumption below even its present levels, thereby clouding the prospects of the realization of surplus value. Recovery depends on more a more optimistic outlook for consumption. The imposition of social democracy on capitalists would raise purchasing power and encourage them to undertake the investments by which the latent surplus value embodied in idle commodities could be realized. Social democracy would be good for the capitalists (and needless to say the workers too). (2) Mass and rate of profit. The level of investment needed for surplus value to have been realized was not undertaken as capitalists had found themselves suffering a declining profit rate and the mass of surplus value coming up short from previous accumulation. For this diminishing flow of surplus value, there are several sub-explanations: (a) the flow of surplus value had been diminished by a rising value composition of capital and U/P labor ratio which even a rising S/V was no longer able to neutralize. This explanation suggests that general, protracted crises can be and are indeed overcome not by improving the prospects of mass consumption but by the destruction and devaluation of capital, along with a rising s/v, that improve profit prospects; encourage a high level of investment demand of which variable capital may in fact become a relatively smaller component; and thereby ensure the realization of surplus value despite the further restriction of consumption and high levels of unemployment! (b) the realized surplus value had been diminishing as a result of an attentuation in the rate of exploitation as the labor market tightened. (c) realized profits were suffering because of the high value of the dollar and the consequent vulnerability to international competition which prevented the mark ups needed for strong profitability. (3) labor shortage. capitalits were discouraged from making the level of investment needed to realize surplus value because they would have been putting in place productive capacity for the valorization of which there seemed to be working class in place. The capitalist way out of crisis then depends on expanding the valorization base and intensifying the rate of exploitation. Explanations 2a, 2b and 3 focus on difficulties in the production of surplus value. Explanations 1 and 2(c) focus on difficulties in the realization of surplus value. Rakesh
RE: Re: RE: Re: The rate of profit and recession
Paul Phillips writes: > What you suggest here is that the profit rate fell despite a *falling organic composition of capital*. I don't disagree though I would again ask is that because of an improper measuring of productivity growth as I suggested in my earlier post? You suggest this seems to contradict classical Marx and I would agree. Doug in an earlier post also suggests that Marx was wrong on some details.< I am disagreeing with "classical Marxism" rather than with Marx himself. Whereas Karl didn't have a complete theory of crises (cf., e.g., Simon Clarke's 1993 _Marx's Theory of Crisis_), so-called "classical Marxism" posits a specific theory based on one of Marx's incomplete theory-fragments as presented in a poorly-edited posthumously-published manuscript (volume III of CAPITAL). Actually, if we were to define "classical Marxism" in terms of what Marxists during Marx's time believed, instead of the allegedly "classical" rising OCC theory, we'd probably define "classical Marxism" in terms of underconsumption or disproportionality. (That doesn't make any of these theories right, though. People should stop using the word "classical" to imply correctness.) As for the issue of measuring productivity, I agree that it's always problematic, especially when services are involved. In practice, capitalism defines "productivity" in terms of producing exchange-value or surplus-value, but what most people are interested in use-value is productivity. > I was suggesting that Marx may also have been wrong on the effect of 'globalization' (internationalization of capitalism) on what I believe you have advocated in other papers, the 'overaccumulation of capital' which I suggested with respect, particularly to China but also to other areas of the 3rd world -- and which has led directly to excess capital, international competition, and a realization crisis for domestic (i.e. North American) capital, particularly in the light of rising USD which exacerbates the realization problem for domestic US production.< I don't understand how Marx was wrong in your view. But I'd actually prefer a discussion of how _I_ am wrong, since discussions of "what Marx (really) thought" typically bog down. >Rakesh suggests I go read Shaik to disabuse myself of such ideas. Well, I have read Shaik, even talked to him about it when he visited our department. We also have a Shaik ex-student on our faculty and we frequently have this discussion -- he gave a couple of lectures in my class last week where this very issue came up.< Shaikh's foreign trade analysis makes sense to me, but his crisis theory doesn't, except in a limited way. In very simple terms, he argues that capitals drive themselves into a situation of lower profit rates because they seek higher profit margins. That makes some sense (under a relatively strong labor regime) -- but it's only a short-term, cyclical, theory. There's no reason why there should ever be a long-term downward trend in the rate of profit, since crises purge imbalances such as excessively high organic compositions and because the capitalists get the workers to pay for crises. >And Jim, as you remember, gave an early version of your paper on the origins of the great depression at a seminar in our department -- was it 15 years ago Jim? [yup!] So I would appreciate a little less patronizing by Rakesh and perhaps a more discretionary interpretation of scripture.< I don't understand this. I don't want to interpret scripture. (You can take the boy out of the Unitarian "church," but you can't take the Unitarianism out of the boy. I'm a skeptic, not a quoter of scripture.) I hope that _I_ haven't been patronizing. > Still, Jim, I think that the question of what was the real increase in productivity (and thus the organic composition) and the impact on realization of the rising exchange rate and increased competition, has yet to be answered.< I don't think it's right to equate increases in labor productivity with increases in the organic composition. There's a lot of variance in that relationship. In my paper that I presented in Sacramento, I didn't even measure the "organic composition," since I was more interested in the _combination_ of the effects of rising "capital intensity" and rising labor productivity on the rate of profit. I interpret the fixed K/Y ratio as measuring this combination of tendency and counter-tendency. Also, I'm not exactly clear what questions you are asking. I hope that you'll indulge me by repeating your questions in a way that I can understand. I do think that the rise of the USD in the late 1990s is an important fact that needs to be brought into the analysis, though. The rising dollar went along with -- or was due to -- a massive capital flow into the US which helped finance the investment & consumption booms of the late 1990s until 2000: investment could continue to rise despite the cyclical downturn in the profit rate and real GDP could continue to rise despite
Re: The rate of profit and recession
Why undermine a perfectly informative discussion with such personal sniping? Please stop. Rakesh Bhandari wrote: > Paul wrote: > So I would appreciate a little less > >patronizing by Rakesh > > really the gall of this is impressive. Just the other day I an > ignoramus whose papers you would flunk. Now after this unprovoked > attack for which you never apologized you are complaining about my > patronizing of you. Have some pride, man. > > Rakesh -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
RE: the rate of profit and recession
I wrote:>>The fixed capital/output ratio continued to fall all the way until 2000 (following its trend from the early 1980s), indicating that labor productivity growth exceeded the rate of growth of fixed capital per worker. The "classical Marxist" theory doesn't seem to work, at least not for this specific example, because the counter-acting tendency was winning.<< CB: >Are you referring to the counteracting tendency termed "increasing intensity of exploitation" ? What about the counteracting tendency " increase of stock capital" in the time period you are discussing ? Was there a big rise in the stock market in this timeframe ?< the rise in labor productivity growth (which, BTW, was not as big a deal as the "new economy" folks alleged) relative to real wages helped raise the rate of exploitation (as measured by the share of profit+interest in the income of the non-financial corporate business sector) until the end of the 1990s, when it started to fall. However, this was not as important as a second trend: labor productivity growth also meant that the ratio of fixed capital to income (K/Y) fell, since the normal rise in the amount of fixed capital per worker (K/L) was out-weighed by the rise in labor productivity (Y/L). The fall in K/Y for this sector was a steady trend after 1980 or so. I don't understand the role of "the increase in stock capital." Jim
The rate of profit and recession
The rate of profit and recession by phillp2 29 January 2002 02:20 UTC Jim, What you suggest here is that the profit rate fell despite a *falling organic composition of capital*. I don't disagree though I would again ask is that because of an improper measuring of productivity growth as I suggested in my earlier post? You suggest this seems to contradict classical Marx and I would agree. Doug in an earlier post also suggests that Marx was wrong on some details. I was suggesting that Marx may also have been wrong on the effect of 'globalization' (internationalization of capitalism) on what I believe you have advocated in other papers, the 'overaccumulation of capital' which I suggested with respect, particularly to China but also to other areas of the 3rd world -- and which has led directly to excess capital, international competition, and a realization crisis for domestic (i.e. North American) capital, particularly in the light of rising USD which exacerbates the realization problem for domestic US production. -clip- Still, Jim, I think that the question of what was the real increase in productivity (and thus the organic composition) and the impact on realization of the rising exchange rate and increased competition, has yet to be answered. ^ CB: How does the rise in productivity ( even "The fixed capital/output ratio continued to fall all the way until 2000 (following its trend from the early 1980s), indicating that labor productivity growth exceeded the rate of growth of fixed capital per worker") imply that the OCC is going down ? Doesn't a rise in productivity usually accompany a rise in OCC ?
the rate of profit and recession
Jim Devine: The fixed capital/output ratio continued to fall all the way until 2000 (following its trend from the early 1980s), indicating that labor productivity growth exceeded the rate of growth of fixed capital per worker. The "classical Marxist" theory doesn't seem to work, at least not for this specific example, because the counter-acting tendency was winning. CB: Are you referring to the counteracting tendency termed "increasing intensity of exploitation" ? What about the counteracting tendency " increase of stock capital" in the time period you are discussing ? Was there a big rise in the stock market in this timeframe ?
Re: Re: RE: Re: The rate of profit and recession
> > >I was suggesting that Marx may also have been wrong on the effect >of 'globalization' (internationalization of capitalism) on what I believe >you have advocated in other papers, the 'overaccumulation of >capital' which I suggested with respect, particularly to China but >also to other areas of the 3rd world -- and which has led directly to >excess capital, international competition, and a realization crisis >for domestic (i.e. North American) capital, particularly in the light of >rising USD which exacerbates the realization problem for domestic >US production. Paul, why did the investment demand of US capital drop off all a sudden? The dollar had been high and rising along with a strong bout of accumulation; in fact it may have fallen relatively before the recession began. So one day the strong dollar is lowering capital costs and inducing accumulation and the realization of surplus value by way of strong accumulation; then the strong dollar is pricing American goods out of the market. What changed? > Rakesh suggests I go read Shaik to disabuse myself of such >ideas. Well, I have read Shaik, even talked to him about it when he >visited our department. His name is Shaikh. > We also have a Shaik ex-student on our >faculty and we frequently have this discussion -- he gave a couple >of lectures in my class last week where this very issue came up. Which issue is that? Whether the high dollar led to realization difficulties that has brought the US profit rate down? Or whether excess capacity is the cause or consequence of crisis? > So I would appreciate a little less >patronizing by Rakesh really the gall of this is impressive. Just the other day I an ignoramus whose papers you would flunk. Now after this unprovoked attack for which you never apologized you are complaining about my patronizing of you. Have some pride, man. Rakesh
Re: RE: Re: The rate of profit and recession
> >The recent falls (i.e., of the last 1 1/2 years or so) are due to falling >demand and rates of capacity utilization. That is, there were realization >problems. Jim, the classical Marxist is not denying that there is falling demand and realization problems! As Mattick Sr puts it: "Every crisis can be understood only in relation to the prosperity preceding it, just because prosperity derives not from the consuming power of society but from the accumulation requirements, imposed by capitalist competition, of the individual capitals which at any time are growing to produce not for an *existing* but for an *expected* market...It is this very process that makes possible the realization of surplus value by way of accumulation, without respect for the restriction of consumption this presupposes. Surplus value becomes new capital, which in turn produces capital. This process, senseless as it is, is actually the consequence of of mode of production oriented exclusively towards the production of surplus value. "At a certain point the realization of surplus value by accumulation is halted, when accumulation ceases to yield the surplus value necessary for the continuation of the process. Then it suddenly becomes apparent that without accumulation a part of the surplus cannot be realized, since demand is insufficient to transform the surplus value lying hidden in the commodities into profit." So the question is why was accumulation halted and why did demand become insufficient for the realization of surplus value, not whether a crisis is experienced in terms of falling demand and rates of capacity utilization and realization problems. Nobody is denying this. The surplus value that had been realized was not large enough in absolute terms to encourage capitalists to produce for a larger expected market. Of course there are always a few capitals that can afford to expand, and on the basis of larger economies of scale they may achieve lower unit costs and restore profitability; but such rationalization by means of accumulation is out of reach of most capitalists who are short on surplus value, so overall investment demand (of which workers' wages are a component) weakens, capacity utilization falls, and realization problems arise. Of course all this purgative work can lead to a restoration of the rate of profit. > > >The fixed capital/output ratio continued to fall all the way until 2000 >(following its trend from the early 1980s), indicating that labor >productivity growth exceeded the rate of growth of fixed capital per worker. And this is Jim D's crucial piece of evidence against the thesis the shortage of surplus value resulted from upward pressure on the OCC. But first note this is not counter-evidence that accumulation had ceased because the surplus value that had already been realized was so declining as a mass as to discourage production for an expanded future market. This slow down in investment demand then leads to a build up of inventories which are then dumped, further depressing profit rates. The question is whether one challenges whether there was a declining mass of surplus value at all before the slow down in investment demand or only the "changing VCC" explanation for that decline. At any rate, since the destruction (disinvestment) and devaluation of capital seem to be what in fact leads to a restoration of profitability and therewith accumulation by means of which realization difficulties are are in fact overcome, I would not count out the crisis explanation of unfavorable changes in the composition of capital on the basis of Jim D's proxy evidence alone. But this counter-argument is far from satisfactory, and I hope that Fred engages you in terms of your most important piece of counter-evidence. >The "classical Marxist" theory doesn't seem to work, at least not for this >specific example, because the counter-acting tendency was winning. Then again what does explain the slow down in investment demand? Rakesh
Re: RE: Re: The rate of profit and recession
Jim, What you suggest here is that the profit rate fell despite a *falling organic composition of capital*. I don't disagree though I would again ask is that because of an improper measuring of productivity growth as I suggested in my earlier post? You suggest this seems to contradict classical Marx and I would agree. Doug in an earlier post also suggests that Marx was wrong on some details. I was suggesting that Marx may also have been wrong on the effect of 'globalization' (internationalization of capitalism) on what I believe you have advocated in other papers, the 'overaccumulation of capital' which I suggested with respect, particularly to China but also to other areas of the 3rd world -- and which has led directly to excess capital, international competition, and a realization crisis for domestic (i.e. North American) capital, particularly in the light of rising USD which exacerbates the realization problem for domestic US production. Rakesh suggests I go read Shaik to disabuse myself of such ideas. Well, I have read Shaik, even talked to him about it when he visited our department. We also have a Shaik ex-student on our faculty and we frequently have this discussion -- he gave a couple of lectures in my class last week where this very issue came up. And Jim, as you remember, gave an early version of your paper on the origins of the great depression at a seminar in our department -- was it 15 years ago Jim? So I would appreciate a little less patronizing by Rakesh and perhaps a more discretionary interpretation of scripture. Still, Jim, I think that the question of what was the real increase in productivity (and thus the organic composition) and the impact on realization of the rising exchange rate and increased competition, has yet to be answered. Paul Paul Phillips, Economics, University of Manitoba From: "Devine, James" <[EMAIL PROTECTED]> To: "'[EMAIL PROTECTED]'" <[EMAIL PROTECTED]> Subject: [PEN-L:22028] RE: Re: The rate of profit and recession Date sent: Mon, 28 Jan 2002 14:29:49 -0800 Send reply to: [EMAIL PROTECTED] > Paul Phillips writes:>In the late 90's we kept hearing from CEOs, primarily > in the US, that the reason inflation was contained was as a result of > increasing competition from offshore companies, in part because of > 'globalization' of production and increased overinvestment (increasing > excess productive capacity) in countries like China, in part because of the > rising value of the USD. Thus the rising wages could only be justified by > increased productivity... Thus, the inability to realize the increased costs > (realization as per Charles) would lead to falling profits would it not. > What then is the root cause of the falling profits?< > > I can only talk about the US and the nonfinancial corporate business sector > at that. Here I am attending to only the proximate explanation. (My > discussion with Fred concerns more fundamental causes.) > > The recent falls (i.e., of the last 1 1/2 years or so) are due to falling > demand and rates of capacity utilization. That is, there were realization > problems. > > Before that, looking at the non-trended BEA data, the decline of the ROP > was due to the declining SOP (share of profits). At the end of the business > cycle upturn, wages started rising relative to productivity, as did raw > material prices (of raw materials produced outside the US NFCB sector). > There may have also been some bottlenecks and horizontal > disproportionalities (such as those due to over-investment in fiber optic > cable) that limited productivity growth in the cyclical peak, too. The cost > pressures pushed toward inflation, but the high US dollar and international > competition kept businesses from raising prices much (at least in the sector > under consideration). > > The fixed capital/output ratio continued to fall all the way until 2000 > (following its trend from the early 1980s), indicating that labor > productivity growth exceeded the rate of growth of fixed capital per worker. > The "classical Marxist" theory doesn't seem to work, at least not for this > specific example, because the counter-acting tendency was winning. > > Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine >
RE: Re: The rate of profit and recession
Paul Phillips writes:>In the late 90's we kept hearing from CEOs, primarily in the US, that the reason inflation was contained was as a result of increasing competition from offshore companies, in part because of 'globalization' of production and increased overinvestment (increasing excess productive capacity) in countries like China, in part because of the rising value of the USD. Thus the rising wages could only be justified by increased productivity... Thus, the inability to realize the increased costs (realization as per Charles) would lead to falling profits would it not. What then is the root cause of the falling profits?< I can only talk about the US and the nonfinancial corporate business sector at that. Here I am attending to only the proximate explanation. (My discussion with Fred concerns more fundamental causes.) The recent falls (i.e., of the last 1 1/2 years or so) are due to falling demand and rates of capacity utilization. That is, there were realization problems. Before that, looking at the non-trended BEA data, the decline of the ROP was due to the declining SOP (share of profits). At the end of the business cycle upturn, wages started rising relative to productivity, as did raw material prices (of raw materials produced outside the US NFCB sector). There may have also been some bottlenecks and horizontal disproportionalities (such as those due to over-investment in fiber optic cable) that limited productivity growth in the cyclical peak, too. The cost pressures pushed toward inflation, but the high US dollar and international competition kept businesses from raising prices much (at least in the sector under consideration). The fixed capital/output ratio continued to fall all the way until 2000 (following its trend from the early 1980s), indicating that labor productivity growth exceeded the rate of growth of fixed capital per worker. The "classical Marxist" theory doesn't seem to work, at least not for this specific example, because the counter-acting tendency was winning. Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
Re: Re: The rate of profit and recession
oops left out a NOT Excess capacity and the global competition to which it gives rise are the effects, rather than the causes, of a retrenchment in investment which is itself caused by diminishing profit prospects which thus remains to be explained. The explanations which are consistent with the labor theory of value include a falling rate of profit caused by rising OCC and/or rising U/P labor ratio or a fall off in the level of investment demand that would equal total potential supply because of a perceived shortage of living labor which is the only source of value added. Fred M prefers the former explanation; I am suggesting that the latter canNOT be ruled out. Rakesh ps may I recommend to Professor Phillips Professor Anwar Shaikh's Introduction to the History of Crisis Theories. In US capitalism in Crisis, ed. Bruce Steinberg. 1978.
Re: Re: The rate of profit and recession
>Fred, Jim and Charles, > >In the late 90's we kept hearing from CEOs, primarily in the US, >that the reason inflation was contained was as a result of >increasing competition from offshore companies, in part because of >'globalization' of production and increased overinvestment >(increasing excess productive capacity) in countries like China, in >part because of the rising value of the USD. Thus the rising wages >could only be justified by increased productivity which we now >realize was not nearly as great as was reported at the time. Thus, >the inability to realize the increased costs (realization as per >Charles) would lead to falling profits would it not. What then is the >root cause of the falling profits? > I think Professor Phillips is suggesting here that unit labor costs were higher than had been reported which coupled with the severe intl price competition resulting from global excess capacity has led to falling profits. This combines the class struggle thesis of profit squeeze with a neo Smithean thesis of internationalized over-competition as a root cause of declining profitability. The former thesis has been criticized for using profit/wage ratios as a proxy for the rate of exploitation by Shaikh and Moseley; the latter overcompetition thesis was directly criticized by Marx himself. Excess capacity and the global competition to which it gives rise are the effects, rather than the causes, of a retrenchment in investment which is itself caused by diminishing profit prospects which thus remains to be explained. The explanations which are consistent with the labor theory of value include a falling rate of profit caused by rising OCC and/or rising U/P labor ratio or a fall off in the level of investment demand that equals total potential supply because of a perceived shortage of living labor which is the only source of value added. Fred M prefers the former explanation; I am suggesting that the latter can be ruled out. Rakesh ps may I recommend to Professor Phillips Professor Anwar Shaikh's Introduction to the History of Crisis Theories. In US capitalism in Crisis, ed. Bruce Steinberg. 1978.
Re: The rate of profit and recession
Fred, Jim and Charles, In the late 90's we kept hearing from CEOs, primarily in the US, that the reason inflation was contained was as a result of increasing competition from offshore companies, in part because of 'globalization' of production and increased overinvestment (increasing excess productive capacity) in countries like China, in part because of the rising value of the USD. Thus the rising wages could only be justified by increased productivity which we now realize was not nearly as great as was reported at the time. Thus, the inability to realize the increased costs (realization as per Charles) would lead to falling profits would it not. What then is the root cause of the falling profits? Paul Phillips, Economics, University of Manitoba On 28 Jan 02, at 12:41, Charles Brown wrote: > Fred: 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? > > ^ > > CB: It makes sense to me, but how do you know it wasn't a realization problem that >caused the profit decline ? I would have to hear from Jim D. on the factual issues, >as I believe his article looked at those data with a number of statistical or >reporting devices that I can't immediately transfer to your question. > > The other issue would be , does your theory of fall in the rate of profit as the >immediate trigger imply a certain reformist program ? What is it ? Part of the >value of a socalled "underconsumptionist" thesis is that it implies putting consuming >power in the hands of the mass of consumers. I can't think of a reform that would be preferred to that. >
The rate of profit and recession
Fred: 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? ^ CB: It makes sense to me, but how do you know it wasn't a realization problem that caused the profit decline ? I would have to hear from Jim D. on the factual issues, as I believe his article looked at those data with a number of statistical or reporting devices that I can't immediately transfer to your question. The other issue would be , does your theory of fall in the rate of profit as the immediate trigger imply a certain reformist program ? What is it ? Part of the value of a socalled "underconsumptionist" thesis is that it implies putting consuming power in the hands of the mass of consumers. I can't think of a reform that would be preferred to that.
