robert mckee wrote:
> http://thenextrecession.wordpress.com/2011/10/26/the-debate-on-the-rate-of-profit-yet-again/
It's great that Roberts studies the actual data on the fluctuations of
the rate of profit, but it hardly shows that there's a secular decline
of that rate. What he does show is that in the US the measured rate of
profit rose from 1982 to 1997 (without attaining the level attained in
the 1960s) and then fell. This is what I (and Doug Henwood) seen has
seen, too.
For the US, we could go all the way back to the beginnings of
capitalist time, but let's start in the 1970s. After the 1960s, the
rate of profit fell drastically, encouraging stagflation (as I've
argued elsewhere). This eventually led to the forming of a capitalist
coalition aimed at "setting things right" (restoring profitability,
ending high inflation, etc.) which led to the rise of what's now
called neoliberalism, led by Paul Volcker and Ronald Reagan. (If we
have to draw the line, I'd say President Carter's appointment of
Volcker to chair the Fed in August, 1979 started the neoliberal era.)
This program actively raised the rate of profit, starting (naturally
enough) in 1982. The problem I see -- which is forgotten in much of
the "falling rate of profit" (FROP) literature -- is that much of the
rise in profitability was due to pushing wages down relative to labor
productivity. The FROP folks also often miss the fact that the efforts
to save profitability can create new problems: starting in the 1990s,
we see what I call the "underconsumption undertow" as a result of
stagnant wages. This created demand problems that made it hard to keep
profits rising after 1997 (due to realization problems). The high US$
exchange rate in the late 1990s also helped here, since any exporting
or import-competing US businesses found themselves at a disadvantage.
(It also raised the real purchasing power of US wages and salaries.)
This combination encouraged the shift toward finance
("financialization").
The high-tech bubble and collapse encouraged a recession, which was
moderated by the Fed, which (under Greenspan) saw itself as having the
job of saving the financiers from their follies and (secondarily)
avoiding deep recessions. Its encouragement of interest rates saved
the day -- but then started the housing bubble, spurred by the way the
financiers jumped to provide credit in an increasingly deregulated
environment (including predatory lending).
The bubble temporarily ended the underconsumption undertow, but (like
other bubbles) it couldn't last. The extravagant consumers, after
saving the US economy in the mid-2000s, found themselves with too much
debt, underwater mortgages, etc. The financial superstructure also was
over-stretched. This encouraged the big recession of 2007-09 and the
persistence of stagnation afterwards. The problem of underconsumption,
which wasn't the "binding constraint" before, is now much more of one,
blocking consumption and also private fixed investment. Falling wages
and house prices make this problem worse, in what I've called the
"underconsumption trap."
While the rate of profit is important to the dynamics of capitalism,
it isn't the whole story.
--
Jim Devine / "In an ugly and unhappy world the richest man can
purchase nothing but ugliness and unhappiness." -- George Bernard Shaw
_______________________________________________
pen-l mailing list
[email protected]
https://lists.csuchico.edu/mailman/listinfo/pen-l
