NY Times, March 12, 2001
Berkshire Hathaway Faces a Tough Insurance Market
By JOSEPH B. TREASTER The insurance businesses at the core of Warren E.
Buffett's financial empire suffered heavy losses last year, reflecting
tough competition in auto insurance and the difficulty of making money in
reinsurance - the business of insuring other insurance companies.
But Mr. Buffett said in the annual report of his company, Berkshire
Hathaway, released this weekend, that earnings from the investment of
premiums exceeded insurance losses of $1.02 billion by at least $934
million, contributing to the company's overall earnings of $3.3 billion. . .
There were several reasons for the poor performance, Mr. Buffett said.
After pumping up spending on advertising tenfold in six years to an
anticipated $350 million last year, Geico probably REACHED THE SATURATION
POINT in promotion, he said, and perhaps a high-water mark in sales to
those Americans most disposed to buy insurance the Geico way: over the
telephone with no agent involved, in expectation of a substantial discount.
"We may have already picked much of the low-hanging fruit," Mr. Buffett
said, adding that "some percentage of Americans - particularly older ones -
are reluctant" to buy anything over the phone or through a computer.
===
WHAT IS A CRISIS OF OVERPRODUCTION? (From marxmail.org FAQ)
Prepared by Patrick Bond
Capital accumulation refers to the generation of wealth in the form of
"capital." It is capital because it is employed by capitalists not to
produce with specific social uses in mind, but instead to produce
commodities for the purpose of exchange, for profit, and hence for the
self-expansion of capital. Such an emphasis by individual capitalists on
continually expanding the "exchange-value" of output, with secondary
concern for the social and physical limits of expansion (size of the
market, environmental, political and labour problems, etc.), gives rise to
enormous contradictions. These are built into the very laws of motion of
the system. Perhaps the most serious of capitalist self- contradictions,
most thoroughly embedded within the capital accumulation process, is the
general tendency towards an increased capital-labour ratio in
production--more machines in relation to workers--which is fuelled by the
combination of technological change and intercapitalist competition, and
made possible by the concentration and centralisation of capital.
Individual capitalists cannot afford to fall behind the industry norm,
technologically, without risking their price or quality competitiveness
such that their products are not sold. This situation creates a continual
drive in capitalist firms towards the introduction of state-of-the-art
production processes, especially labour-saving machinery. With intensified
automation, the rate of profit tends to fall, and the reasons for this are
worth reviewing. Profit correlates to "surplus value" which is only
actually generated through the exploitation of labour in production. Why is
labour only paid a certain proportion of the value produced, with a surplus
going to capital? Since capitalists cannot "cheat in exchange"--buy other
inputs, especially machines that make other machines, from each other at a
cost less than their value--the increases in value that are the
prerequisite for production and exchange of commodities must emanate from
workers.
Louis Proyect
Marxism mailing list: http://www.marxmail.org
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