At 04:28 PM 1/17/97 -0800, Doug Henwood wrote:
>It's not so much that industry is shifting its surplus funds to finance;
>it's more like it's just shipping huge wads of cash to Wall Street. I don't
>remember the numbers exactly - buy my book - but over the last decade or so
>US nonfinancial corps have transferred (through M&A, stock buybacks, and
>dividends) about as much money to shareholders - who have literally
>contributed less than nothing to finance their firms' inestments - as they
>invested tangibly. Though interest rates are down from the 1980s, rentiers
>still extract great piles of additional cash through the servicing of debt
>- which, for nonfinancial corps has been floated mainly to do M&A and stock
>buybacks. At the same time, portfolio managers, especially those of public
>pension funds, have begun to intervene heavily in management, in the
>interest of higher stock prices.
This is a useful perspective of the orders of magnitude (from the real
world, in the best LBO tradition).
1) I suppose its worth separating out the different channels taken by the
fleeing productive capital.
a) Stock buybacks do represent a shift from productive curcuits
to money-as-a-commodity curcuits (and rivals the financial institutions on
"their" turf). Mostly, the M&A funds do the same (i.e. they commodify asset
control, although we will hear a lot of rationalizations over economies of
scale, synergies, x efficiencies etc). To society, there are leakages from
productive capital, but to the productive firms they are an effort inter
grate financial roles (and profits) into their orbit (Japanese-style would
be their dream??).
b) The increased leakages to dividends were also triggered by
the struggle with financial capital - a "defensive" move to prevent
takeovers, etc. But the funds are mainly sent into capitalist consumption
(except for the fraction capitalists re-invest).
2) If I am hearing right the comments from Patrick Bond, Eugene Coyle,
Michael Perelman, and Blair Sandler:
- Its pretty clear that the breakdown (in North America?) in roles
and rules are going to have large and global implications (driven by the
higher ROI on financial capital including "the interest rate").
- Financial capital has built on its gains through bringing
productive assets into the money-as-money curcuits. But so far shows only
sporadic desire to move into the productive circuit itself (Patrick do you
see this differently?). Therefore there seems little likelihood that there
will be a finance-led revival of the productive sector in N.Amer. (never
mind a Hilferding-style structuring). With finance capital retaining its
funds and with productive capital shifting its funds to the finance sector,
there is a real chance of an overheating\meltdown scenario
- Productive capital has massively reduced the proportion it
reinvests in the productive circuit (profits are up, but not tangible
investments). The tendency towards productive dis-investment was partly
offset by increased rates of surplus extraction, but the dis-investment rate
seems to be accelerating. If productive workers were squeezed further, the
new investment could presumably only be realized through the expanded
consumption of those getting income from dividends or the money-as-money
circuit. Baring government redistribution (these days??), the productive
sector faces either dis-investment or a further transformation of the U.S.
into a sharply 2 class society (and then facing a yet bigger realization
problem).
-The international sector is likely to see continued squeezes from
the U.S. money circuit (assuming U.S, finance can continue to successfully
draw on the enormous political control the now enjoy and translate it into
favorable policies). U.S. productive capital, excluded from the key parts
of the E Asia boom ("no one is making money in China"), will try to keep up
with financial capital, obviating the possibility of them playing a
transformative role abroad.
Does this sound sensible?
Paul Altesman
P.S. Doug: I missed the tittle\publisher of your book when it was posted way
back. Could you post it - some other might also be interested.
