From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Tue Oct 30 2007 - 16:46:28 EDT
Rakesh -------- But if credit is withdrawn in one branch as a whole, won't it then be extended to another? --------------- Paul Formulated that way it is wrong. If you said if one sector increases its lending must not other sectors increase their borrowing to compensate, then you would be right. But borrowing is not the same thing as capital accumulation. Borrowing can be voluntary or involuntary. If sector A increases its lending, it reduces its expenditure on means of production, this creates an immediate deficit on current account of those firms supplying sector A, this involuntary borrowing will balance the increased lending by A. Note that this first order effect is to reduce the rate of profit in those sectors that supply A. One must not confuse credit operations with movements of capital betweeen sectors. The latter requires a reduction in the stocks of embodied labour in sector A and a corresponding increase in other sectors. This will not necessarily occur. It can occur, but the process is not automatic. >This effect is much faster acting than the movement >of capital to branches of higher return. Aren't they one and the same movement? ------------------------------------ No The classical theory involved a voluntary re-investment. What I am talking about is accelerated firm death, which is a much more forcible result. >Thus the >mechanism bringing prices into line with values can >be expected to be correspondingly strong. >> That it may be stronger does not mean that it is not in objective contradiction with the tendency towards an equalized profit rate. ----------------------------- It is. Based on the the stochastic theory one makes predictions which contradict those made by the deterministic theory. In particular the classical deterministic theory predicts that the sectoral rate of profit should be independent of the organic composition of capital. The stochastic theory predicts that the rate of profit will be negatively correlated with the organic composition.
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