From: ajit sinha (sinha_a99@YAHOO.COM)
Date: Thu Sep 27 2007 - 12:28:23 EDT
--- glevy@PRATT.EDU wrote:
> via Antonio P. / In solidarity, Jerry
>
> That hissing? It's the sound of bubblenomics
> deflating
>
>
> Merely cutting the cost of borrowing will do little
> to remedy the
> long-term weaknesses of the advanced economies
>
> Robert Brenner
> Wednesday September 26, 2007
> The Guardian
(1) "Reduced profitability has, since the 1970s, led
to a steady decline in the rate of investment as a
portion of GDP, as well as step-by-step reductions in
the growth of the capital stock and of employment.
This slowdown of capital accumulation, along with a
push by corporations to restore their rates of return
by holding down wages, has reduced aggregate demand -
a weakness that has long constituted the main barrier
to growth in the advanced economies."
(2)"Focused on restoring profit rates, corporations
unleashed a brutal offensive against workers. They
increased productivity growth, not so much by
investing in equipment as by cutting back on jobs and
compelling employees to take up the slack. They held
down wages as they squeezed more output per person,
allowing them to appropriate an entirely unprecedented
share of the increase that took place in net
non-financial GDP."
(2) seems to contradic (1). If what is described in
(2) is true, then the rate of profits must rise.
(3)"This slowdown of capital accumulation, along with
a push by corporations to restore their rates of
return by holding down wages, has reduced aggregate
demand - a weakness that has long constituted the main
barrier to growth in the advanced economies."
How could low wages reduce "aggregate demand" and why
should it reduce rate of growth? The slow down of
capital accumulation is first explained on the ground
that the rate of profits is falling (here capital
accumulation is taken as a positive function of rate
of profits). Then it is asserted that allong with it
the wages have been held down. If wages have been held
down, then why rate of profits have fallen? In
Ricardian context this could happen because of
diminishing returns in agriculture, but that is not
the case for the author.
(4)"Governments, led by the US, have underwritten ever
greater volumes of debt, through ever more baroque
channels, to subsidise purchasing power.In the 70s and
80s they incurred continuously larger deficits to
sustain growth. But since the mid-90s they have had to
resort to more powerful and risky forms of stimulus to
counter the tendency to stagnation, replacing the
public deficits of traditional Keynesianism with the
private deficits and asset inflation of what might be
called asset-price Keynesianism - or, with equal
accuracy, bubblenomics."
But then how could there be the sustained deficit of
"aggregate demand"?
May be it's me who does not understand the complexity
of the theory, but I find all such pieces to be full
of theoretical confusions and mixing of cause and
effect. Cheers, ajit sinha
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