On Wed, 29 May 2002, Rakesh Bhandari wrote: > But Fred, here is where I am a bit confused by both your recent > Monthly Review piece and your post here: > > You seem to emphasize the negative underconsumption effects from > rationalization and intensified exploitation over the positive > stimulus effects on the rate of profit and therewith capital > accumulation? > rb Rakesh, this is a good question. My answer has to do with the distinction between the short-run and the long-run. In the long-run, what is necessary for a return to more prosperous conditions is a revival of capital accumulation, which in turn requires a significant increase in the rate of profit. One way to increase the rate of profit is to cut wages. However, in the short-run, wage cuts will reduce consumer spending, which will worsen the current recession. Therein lies the capitalist dilemma: what is necessary to increase the rate of profit in the long-run will make things worse in the short-run. The same thing is true of the other main way to increase the rate of profit - the devaluation of capital as a result of bankruptcies of capitalist firms. In the short-run, bankruptcies (like wage cuts) will make things worse. But in the long-run, that is what is necessary to increase the rate of profit, which in turn should lead to a revival of capital investment and a return to more prosperous conditions. The fundamental problem is not underconsumption. But attempts to solve the fundamental, long-run problem of insufficient profitability will cause a short-run problem of underconsumption. Rakesh, do you see what I mean? What do you think? Comradely, Fred
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