Louis Proyect wrote: > I am nearly finished reading Rick Kuhn's biography of the Polish > economist and have found the chapter on his crisis theory quite > interesting in terms of its explanation of over-accumulation, the > organic composition of capital, falling rate of profit, etc. However, > while reading it, I wondered how relevant Grossman (or other Marxists > focused on the organic composition of capital) is to the current crisis, > which does not involve an increasing organic composition of capital. It, > like most crises since the 1950s, involve "fictitious capital" to one > extent or another, from the savings and loan crisis to LTCM--and now the > credit crisis on Wall Street.
The 1970s-1980s debate amongst radical, socialist, and Marxist political economists was about the importance of different Marxian ratios. Tom Weisskopf (following Roger Alcaly, I believe) summarized it in terms of "phenomenal" or "common-sense" or "empirical" numbers, rather than using value categories. It was something like the following, which is true by definition: rate of profit = (the ratio of profits per unit of output)*(the ratio of output to full-capacity output)*(the ratio of full capacity output to the stock of fixed capital). Different theories, it was said, emphasized different ratios. * The "profit squeeze" theory (of Glyn & Sutcliffe, Boddy & Crotty, Bowles _et al_, maybe Henwood) emphasized the fall in the ratio of profits to output as hurting profitability. This is akin to a depression of Marx's rate of surplus-value, as seen for example as being the result of excessive accumulation (sketched in CAPITAL, volume I, ch. 25). Related to this is the idea that accumulation pulls up raw-material prices, shifting profits over to the rent income of raw-material owners. Since they are often outside of the country, it might hurt domestic accumulation. * Other theories (such as different versions of Baran & Sweezy) emphasized the second ratio: falling or stagnant use of capacity due to low demand due to underconsumption hurt profitability. This is not seen explicitly in Marx, but one can read in the possibility of stagnant consumption increasing the turnover time of commodities and of fixed capital, so that the realization of surplus-value as profits is delayed and reduced. * Yet others (mostly British) emphasized the role of the third ratio, which is akin to Marx's organic composition of capital but moves in the opposite direction. The "productivity" of fixed capital (output per unit of fixed capital) falls when the organic composition rises. The latter is often measured as C/(C+V) or C/V or C/(V+S). The last one is most analogous to the inverse of "productivity" of fixed capital. This theory appears in a very incomplete form in volume III of CAPITAL. (That theory does not predict that profit rates will actually fall, by the way, since the counteracting forces might overwhelm what's often seen as the "main" tendency.) A related theory is that the importance of unproductive labor and capital has become more important over time. That's been developed by Fred Moseley, among others. Shane Mage has a different but related theory. Rather than getting into arguments about measurement, it's pretty obvious that there is no "orthodox" Marxian theory of crisis (since Karl never finished CAPITAL) and that each of the three has something to say about the laws of motion and crisis tendencies of capitalism. That was a major point of my Ph.D. dissertation (now lost in the fog of history). I analyzed all of the Big Three crisis theories and some hybrids. Each had flaws and each had some assets. My dissertation's synthesis was the idea that capitalism by its very nature drives itself into situations where the profit rate is depressed. Capitalism fouls its own nest. (Alas, we're forced to live in that nest!) In my dissertation, my emphasis was on over-accumulation (of fixed capital) relative to supply constraints. This is akin to the first of the Big Three sketched above, but can bring in the effects of a rising organic composition, which is also a "supply side" theory. In my 1983 article in the REVIEW OF RADICAL POLITICAL ECONOMICS and my 1994 article in Paul Zarembka's RESEARCH IN POLITICAL ECONOMICS, I presented an alternative possibility: over-accumulation relative to (stagnant) consumer demand, along with the possibility of an "underconsumption trap" in the aftermath of the downturn. This is akin to the underconsumption theories, but emphasizes the independent role of accumulation, driving itself out of sync with consumption. It's the "out of sync" that leads to a crisis (violent equilibration) rather than simply stagnation (emphasized by Baran & Sweezy). Key was the fact that the abstract laws of motion of capitalism are not enough to tell us which of the two species of over-accumulation actually occurs. (The old visions often asserted that there was only one kind of crisis.) We have to bring in more concrete analysis. My view is that in "strong labor" political economy (such as that of the US in the 1960s), it's over-investment relative to supply constraints that dominates. (This puts me in the same camp as Glyn, Sutcliffe, et al.) In a "weak labor" political economy (such as that of the US in the 1920s or the 1980s to the present), it's the over-investment relative to demand that dominates. (This puts me in roughly the same camp as Baran, Sweezy, et al.) In this view, a major force that has kept profit rates down from the 1990s to the present has been stagnant wages, widening gaps between classes, and what I call the "underconsumption undertow" (though a little "profit squeeze" may have hit in the late 1990s). This does not mean that the economy does not enjoy (or suffer from) economic booms, however. These days, economic booms are based on credit-based bubbles: the dot-com bubble of the 1990s and the housing bubble of the 2000s. Because productive capital is having a chronic problem of stagnant consumer demand, expansion of fictional capital is needed to prop up private fixed investment (which can go too far, as in the housing bubble). This gets us back to the comment by Louis above. (Of course, government deficits can also prop up the economy, for awhile.) -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
