On Jul 1, 2012, at 2:12 AM, nathan tankus wrote:
"Everyone who plays this game does it by different rules. Many
esteemed Marxist profit-watchers adjust the official stats in
numerous ways, such as trying to eliminate “nonproductive” activity.
While I understand the interest in jiggering the numbers, no known
capitalist can see or feel the adjusted rate of profit. What they
(and their shareholders) care about is the actual rate of profit,
reported in cash money, relative to the amount of capital that had
to be invested to gain the return."
But net profits are not reported in "cash money," only operating
profits are. Net profits involve numerous accruals and accounting
tricks.
Nor do investors care about profit "relative to the amount of capital
that had to be invested to gain the return." They are concerned about
(net accounting, not real operating) profits relative to the current
stock price, the prices and returns on other shares, and the
accounting profits in the previous quarter--none of which has any
economic relation whatsoever to corporate managers' investment
decisions (which, however, in a financialized form of monopoly
capitalism such as has prevailed for the past couple of generations
are greatly, and most perniciously, influenced by their own
speculative stock-and-option holdings, their exorbitant salaries and
bonuses {what Marx called a "swindle" designed to loot from the
nominal owners} and by the perpetual pressure of corporate raiders and
"shareholder activists.")
Could [a left-wing government] restore profitability to enterprise,
shrink inflation and lower unemployment by shrinking other sectors
such as unproductive labor and rent? It seems to me that this is a
logical conclusion from anything I've read from Marxists and Marx.
Yet I've almost never seen it discussed.
Since government employment is by definition unproductive, shrinking
unproductive labor is scarcely what it would be doing! Certainly,
though, shrinking rent, interest, and executive looting of any firm
would increase its profit of enterprise (and hence investment) pari
passu.
Shrinking unproductive labor has no direct effect on profit over the
economy as a whole. Overhead costs are presumably necessary expenses
for the realization of surplus value, so if any company reduces them
it will realize less profit and its "competitors" will realize more
(If Pepsi advertises less than optimum its sales and profits will fall
but be taken up by Coke). Of course, there being no possible
objective standard of "productivity" for overhead expenses there tends
to be enormous waste under that heading. But even cutting out
wasteful overhead, however beneficial to the firm involved, will wash
out over the economy as a whole because the cost savings of one become
an identical amount of reduced monetary demand for the output of all
the others.
Fred Moseley has also emphasized the importance of increases in
unproductive labor to the 1970's:
"there were two main causes
of the decline of the rate of profit in the postwar US economy from
the late 1940s to the mid-
1970s: an increase in the capital invested per worker, and an
increase in the ratio of
unproductive labor to productive labor. According to my estimates,
these two trends contributed
roughly equally to the total decline in the rate of profit during
this period (see Moseley 1991,
Chapter 4)."
These are not separate trends. The increase in unproductive labor
involves an increase in the unproductive portion of the circulating
capital ("c") compared to "v." Much more important it involves a
huge increase in the unproductive part of the fixed capital ("C"), in
the form of corporate headquarters and office buildings, shopping
malls, computers and their software, executive jets, etc. That a lot
of these involve executive looting of surplus value scarcely can be
said to diminish their pernicious effect on profit of enterprise.
On another note, I'm not so sure unproductive labor should be
completely ignored when calculating the rate of profit.
It should not be ignored at all, as stated above. Even though it has
no influence at all on the numerator of the profit rate it has a major
influence on the denominator and thus on the Organic Composition
(provided that Marx's concept of "Technical Composition" be expanded
to reflect the hypertrophy of unproductive capital in the modern
system of Financialized Monopoly Capitalism).
I think perhaps executive pay should factor in too. If the
executives think they can dramatically increase their compensation
through investment they will do so even if the firm as a whole sees
a low profit rate or even sees negative quarters.
Executive pay, beyond the wages of *technical* management, is, as Marx
said, a swindle of the owners by the executives. Executives do not
increase their pay, dramatically or even modestly, through
investment. Its all how much they can get away with at the expense of
the owners through stock-market manipulation. Using funds for
investment gives them nothing. Using them for stock buybacks to
increase the prices of their shares and options lets them make out
like the bandits they are.
Shane Mage
This cosmos did none of gods or men make, but it
always was and is and shall be: an everlasting fire,
kindling in measures and going out in measures.
Herakleitos of Ephesos
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