Fred M:
However, I also think that things are somewhat more complicated than Mattick thought (or at least what he wrote). The following is an excerpt from a paper I am working on about this subject. Comments, criticisms, etc. would be appreciated. Although expansionary fiscal policy does not directly increase the long-run rate of profit, it may do so indirectly over many years in the following way: the expansionary fiscal policy would presumably stabilize the economy and put a "floor" under the economy. The economy could then remain in such a state of "contained crisis" or stagnation for many years, perhaps even decades, with slower growth and higher unemployment. The higher unemployment would put continual downward pressure on wages. In addition, inflation might also increase, as another way for firms to restore their rate of profit, especially if the expansionary fiscal policy is accompanied by expansionary monetary policy. The net result would be constant or declining real wages, so that any increase in productivity during these years would increase the long-run rate of surplus-value, thereby also increase the long-run rate of profit. Something like this seems to have happened in the past several decades in the US economy. Expansionary fiscal policies have prevented a major depression from happening and have put a "floor" under the economy, but they have also resulted in a long period of "stagflation". Three decades of slower growth and higher unemployment have resulted in little or no increase in real wages over this entire period, while productivity increases have been continual, first at slow rates through the mid-1990s, and then at faster rates since then. This combination has produced a very significant increase in the rate of surplus-value over this period (it has roughly doubled from approximately 1.5 to approximately 3.0). Indeed, the rate of surplus-value has increased so much over these decades that as of today (2007), the rate of profit seems to have almost fully recovered from its decline and restored to its early postwar levels. Therefore, although the expansionary fiscal policy of this period did not directly increase the long-run rate of profit, these policies were successful in stabilizing the economy at slower rates of growth and higher rates of unemployment than normal, which provided the conditions for a slow increase of the rate of surplus-value over many years, which eventually restored the long-run rate of profit. This almost complete recovery of the long-run rate of profit without a serious depression and devaluation of capital might seem to contradict Marx?s theory of the falling rate of profit. It is certainly not what Marx expected, but it can be explained on the basis of Marx?s theory. Even though the decline of the rate of profit was not caused by a decline in the rate of surplus-value, but instead was caused by increases in the composition of capital (and increases of unproductive labor), thirty years of stagnant real wages and increasing rate of surplus-value have finally been enough to offset these causes of the prior decline of the rate of profit. Therefore, thirty years of stagnant real wages appears to be a viable alternative to bankruptcies and deep depression as a means of restoring the rate of profit, at least in this case. And to the extent that expansionary fiscal policy makes such a "stagflation" alternative possible, these policies are "successful" in avoiding a depression as the only way to restore the rate of profit. But this alternative takes a long time (as of ten years ago, the rate of profit was still approximately 25% below its early postwar peak). Marx?s theory provides an explanation of why the restoration of the rate of profit has taken so long ? because the rate of surplus-value had to overcome these prior increases in the composition of capital and unproductive labor. At the very least, the decline of the rate of profit and its slow recovery can be explained much better by Marx?s theory than by mainstream theory, which provides no explanation at all of these all-important trends. Comradely, Fred ^^^^^^ CB; Fred, thanks for your comment. Has it been mainly in the U.S. that crises have been smoothed over, and long term rate of profit raised ? If so, might the theory of dollar hegemony ( new imperialism) put forth by Henry Liu and Michael Hudson have something to do with raising the long term profit rate of U.S. "based" corporations ? Does the almost complete recovery of the long-run rate of profit without a serious depression and devaluation of capital depend in part on the gouging of the Soviet Union and Eastern European economies when they were opened up for looting ? And the opening up of the "Non-Aligned" countries similarly to be looted in neo-liberal imperialism ? I know it's a big debate, but Marx says both that the law of the tendency of the rate of profit to fall and inadequate demand from the masses of consumers/wage-laborers explain/cause crises ? With wages falling over the period you mention, how were profits _realized_ ? Does the current financial regime "print" the money , effectively , to pay and realize the profits ?
