This piece is bizarre, Charles... Sounds like a desperate attempt to adapt
vulgar marxist theory to things it never (AFAIK) tried to explain...
>It's not too difficult to see why the previous super-optimism about the
>prospects for capitalism has turned sour. In the last month, the big US
>companies have been reporting their profits to their shareholders. And all
>is not well.
Yet the market already falled this spring... So there must be another
explanation.
>By that I mean,
>the return on each dollar of investment in new technology and more labour
>is falling from say 12c to under 9c. That means the gains from making such
>huge investments in the Internet and computers are not producing the extra
>profit at the same rate.
No source for this statistic (even on the website).
Either it's a statistic about the whole economy beign misinterpreted as talking
only about IT stuff or it's a sectorial statistic and thus meaningless from a
marxist standpoint because it ignores financial transfers.
>Marx explained how this would happen under capitalism. Capitalism is
>system of production that only produces more if the private owners of the
>means of production (land, plant, equipment and employers of labour) make
>more money than they invest.
Let's not split hairs as to how this general principle applies in reality... Here
we're obviously faced with a huge bubbly exception. The explanation of the
behaviour of the capitalists here is way more financial than materialist and
Marx will not help much.
>Since 1995, US capitalists have been engaged in the most competitive
>struggle to increase productivity through new technology and the Internet
>economy.
Where does this come from? The WSJ? ROTFL
>It recently produced
>results that showed a jump in profits from just under $1bn a quarter in
>1999 to $1.5bn in the quarter ending July 2000. Pretty impressive, so all
>is well? No, because these figures left out two important aspects. The
>first was the buying up of other new technology companies. When the cost of
>that is included, the net profits actually fell from $850m to $820m.
You don't take back M&A from profits. It makes no sense at all. This is
apparently a desperate attempt to create a fall in profits so that reality fits in
some people's reading of Marx.
Even regular investment should not be a drag on profits. Neither the surplus
value created within the investor company nor the surplus value created within
the capital goods company is somewhat cancelled. And M&A is only a
transfers of claims on production between capitalists. It would make sense to
dilute the future profits of the result of a merger to observe the evolution of the
rate of profit within the company (since the amount of capital in the new
corporation is higher than in any of the old ones), but this is not what he's
doing.
If we wanted to correct profits this way, we couldn't logically stop there. Every
other company doing M&A would be losing money. Would there still be profits
after that in the economy as a whole? What would his 12 or 9 cents a dollar
look like after that deduction? And logically, we would also have to take
lending and portfolio investment out of corporate profits because it's not much
different from M&A... And since the growth of debt is astounding, the growth in
negative profits would also be astounding... In fact, since money is debt,
capitalists would never be able to make any profits...
When a capitalist buys assets from a second one no profits are lost. Marxists,
look at capitalists as a class!
>In
>other words, Cisco had to keep buying up competitors or companies with
>important technologies to stay ahead.
So what?
>If the
>stock market goes down, so will the profits of Cisco.
If the bubble collapse, the whole bubbly sector will collapse with it. No news
there. But as to how this is explained...
Capital gains and losses should never have made to the profit figure. I can
understand capitalist economists thinking that way, but marxists??? Does
stock-market fluctuations add and remove marxist value to a capital stock???
What do asset prices have to do with Marx's TRPF?
>Production
>of semiconductors up 77% this year. This spells overcapacity, especially as
>each extra bit of investment is producing less of bit of profit - the rate
>of profit is falling. So far, that means a slower growth in overall profit.
>Soon it will mean an actual fall in profit. Then the crisis of
>over-investment will turn into a crisis of overproduction.
There has been powerful semiconductor cycles for a long time. No news. But
what we're facing is something else, something more significant...
>First, if investment slackens off because the rate of profit is in decline,
>then the productivity growth in industry will also fall back. Slower growth
>of productivity will mean production costs will rise squeezing profits
>further.
Now, this is really weird. Instead of arguing that lower investment means less
accumulation and less fall in the rate of profit, he puts unreconstructed
capitalist propaganda about productivity in the mix and argue that it will
increase the fall in the rate of profits. What can I say? Well, I'll be content with
saying that slower productivity growth means not an increase but a slower
decrease of the costs of production. The costs of production can of course
rise, but it won't be because of lack of investment. Lower investment will
indeed squeeze profits, but because so much profits are built on an
investment bubble (investment is also demand).
>Second, the shock of high oil prices is beginning to drive up costs of
>production as well. And with petrol and heating costs rising, workers in
>America and Europe are demanding either relief or they will want higher
>wages. That will not mean higher prices so much because of the intense
>competition among capitalists for market share, particularly in the
>Internet sectors. The result will be another squeeze on profits.
Marxists, drop the vulgar capitalist press! Whatever happens in the Internet
sector will not compensate for higher oil prices. First, that competition for
market-share is bound to stop at some point. Second, it's simply insignificant
compared to the whole economy. Third, whatever productivity gains achieved
by IT will be affected by the higher energy costs that will have to be paid for
the use of IT.
If prices don't go higher, profits will indeed be squeezed (not the other way
around). In other words, the only way to keep prices from going higher is
extreme monetary restraint which means depresssion.
>In 1998, shares were equivalent to over 20% of all the savings of American
>households.
American households? Where has class analysis gone, folks? And a stock
market crash won't only hurt shares... Talk about a meaningless stat!
>Sucked in by the huge boom in share prices since 1995, never
>have American middle class families' futures depended so much on the Dow
>and the NASDAQ. If share prices keep falling, households will feel poorer
>and stop spending.
Most households (very different from "the average household") won't feel
much poorer and will benefit of the low interest rates that a low stock market
will allow.
>And a falling stock market will also hit further investment by
>capitalists as their income that companies like Cisco get from stock market
>investments disappear.
This is crap. There is no income from movements in asset prices, only some
profit redistribution and more importantly credit creation or destruction. The
income from Cisco's aquisitions will stay even if a fall in their shares
depresses its accounted profits. What will affect Cisco's income is something
else...
Well, marxists, forget IT, productivity, and growth. Stop to read the financial
papers. Pick-up good old W/P and get back to sensible analysis.
Julien
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