From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Sat Sep 29 2007 - 16:36:01 EDT
Ajit, I think that there are more unbound variables in the system than you allow.
Consider first the issue of rate of profit. You are quite right to point out that
one would expect this to be negatively correlated with wages, so that lower
wages would tend to imply higher profit rates. But there are several possible
confounding variables.
You identify rent among these and say that this would only be relevant in the case of
diminishing returns to agriculture. Well in an early 19th century model this
would make sense, but today rent on commercial premises in city centers and
rent obtained from mineral rights are probably more significant, and in
both cases diminishing returns probably do apply - both to oil production
and due to congestion in central business districts to office rents.
But there are 3 other possible confounding factors that spring immediately to
my mind:
a) changes in the organic composition of capital could lead to lower rates of
profit despite higher rates of exploitation. From empirical work we did years
ago on the UK, this did seem to be the case there during the 1970s and 1960s.
But for this to occur you do need a very rapid rate of accumulation to build
up the capital stock - something that Brenner says is absent. Well it may
be absent in the US , but it is certainly present in China where accumulation
is currently standing at around 50% of GNP - a quite astonishing figure.
b) Changes in the share of surplus value going as profit can also be due to
interest payments making up a larger share of surplus value. It depends on
whether he is talking about gross profit or profit net of interest. If the
gearing ratio has risen, then a larger share of surplus may be going as interest
rather than what Marx called profit of enterprise.
c) An increase in unproductive employment can consume surplus value and lead
to a lower rate of profit. This may well have been occuring recently.
Why might there be a sustained deficit in aggregate demand?
Well if the money rate of wages does not rise as fast as the growth of productivity (in
money terms), then the excess product must either be:
1) accumulated
2) consumed unproductively
3) consumed by the working class on credit
I have not read Brenner, but it is at least possible to argue that options 2 and 3 have
been what has occured since the 90s.
Paul Cockshott
www.dcs.gla.ac.uk/~wpc
-----Original Message-----
From: OPE-L on behalf of ajit sinha
Sent: Thu 9/27/2007 5:28 PM
To: OPE-L@SUS.CSUCHICO.EDU
Subject: Re: [OPE-L] Robert Brenner, "That hissing? It's the sound of bubblenomics deflating"
--- 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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