From: Rakesh Bhandari (rakeshb@STANFORD.EDU)
Date: Tue Jun 03 2003 - 19:19:31 EDT
Paul C writes: > >My take on it is that there are various factors which can lead to >a falling rate of profit - rise in organic composition of capital, >fall in the rate of surplus value, higher unproductive overheads, >higher share of surplus value going in rent - etc. A consequence >of all or any of these is to lower the rate of profit relative to the >long term rate of interest. If this happens, then accumulation will >slacken, and the slackening of accumulation, will by Kalecki's formula >further reduce profits. Under these circumstances you get a >deflationary pressure in the economy which can be partially >offset by state expenditure - or in principle by luxury expenditure >by the wealthy. 1. I think one of Shaikh's piece on effective demand underlines the contradictions engendered by the offsets which you mention. For example, couldn't the tax burden from increased state expenditure eventually compound the problem of insufficient profitability? Michael P has also theorized the contradictory effects of said offsets. 2. Don't see how luxury expenditures will relieve excess capacity if it is in the form of idle div I and div II plants (assuming a div III for luxuries). I know capitalists are supposed to earn what they spend, and one could in fact write an apologia for orgies of capitalist consumption from a Kaleckian perspective. But this seems facile to me. 3. can't the slackening of accumulation right itself without govt intervention or a spree of luxury spending? or rather why can't it right itself any longer? For example, say the slackening of accumulation spreads to Dept II and final sales suffer, wouldn't firms be forced to scrap old technologies and excess capacity and invest in those processes that lower costs faster than prices are falling? Moreover, for those investment projects that are meant to meet a long term trend couldn't a drop in immediate consumption be favorable as firms may decide that it's favorable to build on the trend and thus take advantage of lower depression prices in materials, wages and possibly interest rates? What has changed in the morphology of capitalism that capital can no longer count on itself to self correct its own downswings? > >You dont have to chose either realisation problems or >rate of profit problems when looking at real economies. >Both phenomena occur. Yes but from the perspective I defend, protracted realization difficulties are the result of the withdrawal of effective demand consequent on a fall in profitability. It's a matter of causally ordering the phenomena. More later. Yours, Rakesh > >>>> >>>> >> OK here you point to the possibility of zero to negative >>accumulation. You seem to rule out the solution of unproductive >>consumption because of serious competition on the world market, but >>serious competition on the world market would seem to make >>impossible zero or negative accumulation as long as accumulation >>had continued to pay! >> >I was considering the situation of the UK in the late 19th century, >when world market competition >was slight, and the wealthy could just live off the income of their capital >with little pressure to accumulate to modernise. The other factor >is that in those days there was a higher portion of private >firms as opposed to public companies. > >This is less the case now that there is intense international competition. But >this in itself would not totally rule out unproductive consumption as an >absorber of profits, since a major part of profit can be absorbed in pension >payments under private pension schemes. This however, depends on >regulatory circumstances - are the pension schemes allowed to back >annuities with equity or must they hold government bonds for this >purpose. In the UK they must do the latter, I dont know the regulations >in other countries. > >>That is, if there is both serious competition on the world market >>and technological progress, then capitalists should continuously >>invest in new capital equipment embodying the latest technical >>developments out of a fear of falling behind each other; that is, >>the Keynesian-Kaleckian problem of inadequate effective demand >>should only prove serious as a result of the fall in absolute >>profitability consequent upon overaccumulation. >> >In a system of joint stock companies with well developed >financial markets any significant company has open to it >the pseudo-rentier option - it can accumulate its capital >indirectly via the financial markets - which it will do if >the rate of return there appears better or safer than >direct investment. I suspect this is happening in Japan. > >> At any rate, this does not seem to be your interpretation in >>which overaccumulation is the result of an absolute labor shortage. >>In this case, wouldn't the doses of extra effective demand from >>unproductive consumption or debt financed govt spending only >>compound the underlying problem? >> >It does not solve the problem, but capitalist economies are forced >into this if they are to sustain economic activity, and also because >the state is the debtor of last resort in the system of aggregate >financial circulation. Any serious fall back in accumulation >has the effect of increasing the public sector deficit since >public expenditure either grows in a recession, or shrinks >slower than tax revenues. > >>I don't see how a or b are solutions to overaccumulation, as you >>have theorized it on the basis of a demographic conversion. >> >They are not solutions but consequences. > >>Morever, it's not clear to me whether you accept Marx's theory that >>as the govt consumes the capital which it borrows, its paper is in >>fact fictitious capital (Larry Summers has referred to govt paper >>as a "sterile asset"). >> >Govt debt is clearly not capital in the sense of >accumulated value it is a capitalisation of future >revenue. This does not imply that government >dept may not be backed by assets of real value, >which potentially can be sold off. > >It depends on whether the debt has been used >to finance material assets of not. > >-- >Paul Cockshott >Dept Computing Science >University of Glasgow > > > >0141 330 3125 >
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