From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Sat Nov 19 2005 - 09:52:13 EST
----- Original Message ----- From: "Jurriaan Bendien" <adsl675281@tiscali.nl> Sent: Saturday, November 19, 2005 9:34 AM Subject: Re: [OPE-L] misusing national accounts data >> It would be interesting to know over which period is the stagnation of >> fixed investment referred to. Stagnation here does not refer necessarily to constancy, but to reduced absolute and relative growth rates of net fixed investment in the private sector, in real terms. Just quickly, for the USA, see the relevant tables at < http://www.bea.gov/bea/dn/nipaweb/SelectTable.asp?Selected=N#S5 > Since 1980, total annual GFCF (public, private and household) roughly doubled in OECD countries, but bear in mind here e.g. the US population also increased by 31% in the meantime from 226 million to 297 million. For Europe, see < http://epp.eurostat.cec.eu.int/portal/page?pageid=1996,45323734&_dad=portal_schema=PORTAL&screen=welcomeref&open=/&product=EUROIND_NA&depth=3> For Japan, see < http://www.boj.or.jp/en/ronbun/03/data/ron0309a.pdf >. The OECD Economic Outlook publication also provides historical series. A while back, the OECD suggested growth rates in real gross fixed capital formation (including government investment, private investment and residential investment) as follows: United States: 2003 8.0% 2004 2.9% 2005 3.0% European Union 2003 0.4% 2004 2.4 % 2005 2.4 % Japan 2003 -1.9 % 2004 -1.4 % 2005 -2.0 % Broadly I think you can say the tendency to stagnation of productive fixed investment in the OECD private sector begins around 1980 (in Japan, 1990). In the second half of the 1990s, total GFCF surged to double the level of 1980, but a lot of that investment wasn't in plant & machinery (except for computers and ICT technology) but in real estate plus fittings. Since about 2000 there's again stagnation, with an upturn this year. Obviously, if the average price level of real estate sharply increases in aggregate, this will feed into the recorded investment totals; even constant dollar historical series of new fixed investment are likely to be distorted by the overall increase of the price level of real estate. In addition, the turnover time of fixed capital has decreased (accelerated obsolescence or scrapping). To make the argument stick, you really have to look at disaggregate fixed investment data, not total GFCF, and the proportion of private fixed capital investment in total business investment. I haven't done this systematically for all OECD countries, but all the evidence I do have, suggest a stagnation of productive fixed investment in the private sector. In OECD countries, the argument was made in the 1980s that if workers moderated their wage claims, employers could/would invest more, and thus create more jobs. That hasn't really happened so much, and a lot of the new jobs are low-paid service jobs or parttime jobs. As regards the reproduction schemes, "circulating capital" should not be confused with the "circulation of capital". Marx suggests capital can be tied up as money capital (liquid funds, securities etc.), commodity capital (tradeable products) or production capital (means of production). Interestingly, Marx comments "Industrial capital is the only mode of existence of capital in which not only the appropriation of surplus value, or surplus product, but simultaneously its creation is a function of capital." (Cap. Vol. 2, chapter 1, section 4). That is why it has central importance. But capital also has many other "modes of existence", which, however, are largely a mystery to those Marxists obsessed with capital at the point of production. Basically what happens in the OECD countries is that a decreasing proportion of total capital is tied up as production capital, and more in trade and finance. Since the mid-1990s, total capital tied up in bonds worldwide has quadrupled, and there was a real estate boom. Thus, an increasing proportion of surplus value is now extracted and realised as interest and rents on assets. The true magnitudes are not easily discernible, if you just focused on official data, because - GFCF does not equal total capital investment, - GDP excludes a portion of property income (including capital gains and land rents) - value-added statistics obscure international transfers of value (imported products resold locally at inflated prices "add value" in the domestic economy). Four main reasons for that whole trend I describe are: - lowered relative profitability in the productive sector, - higher profitability in the financial and trade sector, - the increase in physical productivity of the productive sector, - lack of strong consumer demand growth except among the rich, and - the export of production capital to other countries where production costs are lower. The effect is a gradual reorientation of the accumulation process, to - luxury consumption, real estate, speculation and armaments spending; - the relative decline of primary production and manufacturing; - the strong growth of the number of low-paid service jobs; - and an international division of labour in which wage and productivity differentials are fully capitalised upon. The distinction between fixed and circulating capital hasn't got much to do with it, because that distinction refers only to production capital, not the reproduction of total social capital. Jurriaan
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