>[somehow my e-mail program isn't cooperating again. Here's my complete >message.] > >[I thought I started writing a reply to this, but somehow there's no file. >I'm sorry if anyone received two versions.] > >Paul Phillips writes: >The question we were discussing, I thought, was what >explains the drop in profits after 1997 (despite rapidly rising labour >productivity) and which subsequently resulted in a fall in investment >initiating the recession. Your data, at least as I read it, questioned >whether the fall in profits was initiated in production given the stable K/Y >ratio.< > >right, though it's not my data. (It's from the U.S. government's Department >of Commerce.) In fact, in the U.S., the K/Y jelly -- I mean ratio -- was >moving in the wrong direction after 1980 or so in order to explain a fall in >the rate of profit. Though there are other eras which are more "classical" >in appearance (in the sense that excessive capital intensity [fixed K/Y] >explains the profit rate's fall), the period since 1980 or so, like the >period from 1919 to 1929, didn't fit that rubric.
but the question remains what the relation of such data are to Marx's variables of vcc, occ, s/v, and U/P labor ratio. > > >The proximate cause of the fall in the rate of profit during the last part >of the 1990s/2000 boom was a fall in the profit share. This in turn was due >to a boom-driven fall in unemployment, going down to 4%, which eventually >raised wages. But why would the underconsumption undertow have kicked in at the point that consumption gains were being generalized? >The boom also pulled up raw materials costs to U.S. >businesses. oil prices skyrocketed but what about a basket of raw materials? and does the timing work out? hasn't the recession grown worse as raw material prices have weakened? > The latter were unable to pass the costs onto consumers as >higher prices because of the high dollar. the high dollar may have also reduced capital costs. > Increased competition from a large >number of places -- including China -- as part of the world-wide race (or >crawl) to the bottom, i.e., competitive austerity and export-promotion put a >squeeze on U.S. profits. Why did this decrease mark ups more than costs? > > >I don't discount underconsumption forces except as an explanation of the >proximate causes of the decline in profitability. Instead, I see them as >working in the background, determining the conditions needed to be met to >allow a sustained boom. Given the "underconsumptionist undertow" resulting >from the one-sided class war in the U.S., the only one way that we could see >a sustained economic boom of the sort that prevailed in the 1990s was to >have either a profit-driven investment boom, a credit-driven workers' >consumption boom, a boom of luxury spending, a surge in U.S. net exports, >and/or a rising government deficit. Given the general stagnation of most >countries outside the U.S., due to the one-sided class wars and >neo-liberalism there, along with the highly valued US$, the penultimate >substitute for consumption growth was ruled out. The neo-liberal policy >revolution ruled out the last one on the list; in fact, the US government's >budget went into the surplus territory. > >So, the boom was based on profit-driven investment and a rise in luxury >spending, each of which were pushed along by the rightward shift in the >income & wealth distributions and the stock-market bubble, plus credit-based >consumer purchases by workers. But all of these created imbalances which >made the boom more and more prone to collapse. Debt accumulation and a more >rapid growth of industrial capacity are the most crucial imbalances. In >addition, these types of spending are especially flaky -- subject to >fluctuations -- compared to income-based workers' consumer spending, so >demand became increasingly subject to fluctuations as it became more >dependent on them. These imbalances make the boom increasing unstable. I don't see how this responds to Fred's point that less mass underconsumption would have made the boom more unstable, more vulnerable to an earlier collapse; moreover, I don't see how this responds to the classical Marxist argument (Grossman, Mattick, Yaffe, Daum, Cogoy, Shaikh, Moseley) that less underconsumption in a downturn may not only not help in overcoming the dowturn, it may exacerbate it. After all, if the overcoming of realization problems depends on the revival of accumulation which in turn depends on the brighter profit prospects generated by the crisis-created cheapening of constant capital and intensifying of the rate of exploitation, how would less underconsumption and less restriction on wages overcome the crisis? > >Toward the end of the 1990s/2000 boom, we saw the possibility of an escape >from the underconsumption undertow, as wages started rising (in the U.S.) >relative to productivity. But given the world political economy of >neo-liberal triumphalism and IMF- and TNC-driven wage cuts, this didn't >widen to include many other countries or last very long. So the undertow >remained. yet the crisis broke out when the undertow was at its weakest. unemployment was at a low, the consumption of the Asian masses was recovering. So this explanation seems to have some empirical problems of its own. > Back in my 1983 REVIEW OF RADICAL POLITICAL ECONOMICS article on >the Great Depression, I said I believed that in a weak-labor regime where >the underconsumption undertow operated, booms were increasingly fragile -- >so that even a surge of wages could pop the bubble. I think that's part of >how things worked out in the 1990s, though of course there were other shocks >to the system (such as the collapse of telecom, dot-com, etc. and 911). The >point is not that shocks knocked the system down as much as that the system >was increasingly a house of cards. I don't think booms come to an end just because any arbitrary card has been removed from the structure. Booms have more stable foundations and generalized, protracted crises are due to problems in the foundational structure, not just the taking away of any old card. The house of cards metaphor is inapt, which is not to say that theory is not inherently metaphorical. > >>(ps. the references to scripture, etc. were not referring to you.)< > >that's the problem with Perelman's rule that we can't attach individual's >names to descriptions of assholery. Do you think you are *not* calling me an asshole? Rakesh
