RE: increasing profit rates
If, in the US, then If you were to estimate what caused the increasing rate of profit during the last decade, how much credit would you give to weakening unions [8%] globalization[6%] lower environmental/regulatory standards [4%] financial shenanigans (i.e., manipulating pensions) [30%] new technology [15%] better management [37%] please tell me I'm wrong, Ian -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: RE: increasing profit rates
Ian, you win the prize. If, in the US, then If you were to estimate what caused the increasing rate of profit during the last decade, how much credit would you give to weakening unions [8%] globalization[6%] lower environmental/regulatory standards [4%] financial shenanigans (i.e., manipulating pensions) [30%] new technology [15%] better management [37%] please tell me I'm wrong, Ian -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED] -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: RE: increasing profit rates
weakening unions [8%] globalization[6%] lower environmental/regulatory standards [4%] financial shenanigans (i.e., manipulating pensions) [30%] new technology [15%] better management [37%] please tell me I'm wrong, Ian o.k. You're wrong. Lower standards implies that there were higher standards previously, which I doubt. The financial and management categories seem way high. There is evidence the wave of downsizing did not improve profits. It was stupid policy. My vote would be for unions/globalization (i.e., falling labor costs due to relocation or threats to do so) and tech. Globalization and labor cost lend themselves to measurement, so a comparison of trends with that of profit rates would be informative. The rest, including technology, is guesswork, IMO. mbs
RE: RE: RE: increasing profit rates
The rest, including technology, is guesswork, IMO. mbs === What would need to happen to get adequate metrics for the other factors? Ian
RE: Re: RE: increasing profit rates
lower environmental/regulatory standards [4%] Max, I guessed at this being above zero on the odds that firms litigate their way to exemptions which have a cumulative effect of hollowing out enviro. regs. despite their being formally on the books. Ian
Re: increasing profit rates
At 08:05 AM 8/23/00 -0700, you wrote:
If you were to estimate what caused the increasing rate of profit during
the last decade, how much credit would you give to
weakening unions
globalization
lower environmental/regulatory standards
financial shenanigans (i.e., manipulating pensions)
new technology
better management
I can't say I agree with Ian's percentages, since the various factors are
related and interact with each other. In other words, it's like trying to
calculate the relative sizes of the environmental and hereditary
determination of an individual's personality or IQ. It can't be done for
such a complex interactive process.
All of the above are important, and I'd link them all as part of the
neoliberal revolution of the last 25 years, the revulsion against
state-guided nation-state-based capitalism. Going from the "golden age" of
the 1950s and the early 1960s into the late 1960s and the 1970s, the rate
of profit fell. This unleashed a wide variety of efforts on both the macro-
and the micro-levels by capitalists and their allies (including most
orthodox economists) to raise profitability. Some of these efforts were
self-destructive, such as the way that falling profitability encouraged
stagflation in the 1970s. But eventually, the efforts weakened unions,
globalized, lowered environmental/regulatory standards back toward the
standards of the "golden age," and introduced (all else equal) more
profitable technology, which allowed the (partial) recovery of the profit
rate in the 1990s.
"Financial shenanigans (i.e., manipulating pensions)" don't always raise
profit rates, since it can involve redistribution amongst the capitalists.
But in the context of weaker labor organization and global organization,
these shenanigans were generally paid for by labor.
Sometimes, deregulation hurts profits (at least in the short-run) as seen
in the fall of once-established powerhouses in the air line industry (e.g.,
Pan Am). I don't know if the airline industry as a whole is more profitable
now than it was in the 1960s or not.
"Better management" seems like an oxymoron. Even from a management point of
view, it seems that today's hot management technique loses its luster
pretty quickly and has to be replaced by another technique (which is often
simply an old management method). The main change in management techniques
in the last 40 years seems to be the initially gradual and then rapid move
from providing a significant percentage of the labor force with job
security, defined-benefit pensions, and the like ("primary labor market"
relations) to a radical generalization of insecurity, defined-contribution
pensions of no pension at all, etc.("secondary labor market" relations).
This shift was most obvious in the wave of down-sizing of the early 1990s.
This shift seems to be profitable in the short-term, but its
profit-boosting capacity in the longer run seems doubtful.
It's possible to get some kind of quantitative take on what's allowed the
profit rate to rise by using the accounting framework behind its
calculation. Using the numbers from the June 1999 SURVEY OF CURRENT
BUSINESS (which are very similar to the revised ones in the June 2000 SCB),
-- The profit rate (rate of return) rose 8.4% from 1970-79 to 1990-98
-- The profit rate from current production rose 7.5% between these dates
because the profits-tax liability (as a percentage of capital) fell by 37.2
percent and the profits after tax (as a percentage of capital) rose by 31.6
percent.
-- Net interest (as a percentage of capital) rose by only 5.7 percent, so
that the overall rate of return rose more (8.4%) than did the rate of
return from current production (7.5%).
Both the financial capitalists and the industrial ones gained, but over
this period, the latter gained relative to the former (the interest rate of
total profits fell by 2.7%). Falling tax obligations (a 44.7 percent fall
in the effective profit tax rate) also helped. The latter suggests that
accounting frameworks are limited: after all, it's possible that
capitalists pass the corporate tax onto consumers or workers, so that
changes in the tax rate are largely irrelevant over long periods.
Another way of breaking down the explanation of the 8.4 percent rise is to
note that the profit share of domestic income rose by 1.1 percent, while
the output-capital ratio rose 7.3 percent. The first component would
reflect the weakening of labor. The second one is more complex, involving a
rise in the "productivity of fixed capital." This Y/K increase seems linked
to the 1980s and 1990s shake-out of U.S. manufacturing (disinvestment from
old equipment and plant), investment in more modern fixed capital, and the
falling prices of some capital goods (specifically, computers) and
important raw materials such as oil. But until more research is done, this
rise is somewhat of a mystery.
Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: increasing profit rates
Michael Perelman wrote: If you were to estimate what caused the increasing rate of profit during the last decade, how much credit would you give to weakening unions globalization lower environmental/regulatory standards financial shenanigans (i.e., manipulating pensions) new technology better management Lower interest rates. PROFITS AND NET INTEREST, U.S. NONFINANCIAL CORPORATIONSA share of GDP by period profit + profit interest interest 1929 10.2% 4.4% 14.7% 1930-34 2.8% 6.4% 9.2% 1935-39 6.3% 4.3% 10.6% 1940-4411.4% 2.0% 13.4% 1945-49 9.7% 0.9% 10.6% 1950-5411.0% 1.1% 12.1% 1955-5910.4% 1.7% 12.1% 1960-6410.1% 2.5% 12.6% 1965-6910.5% 3.2% 13.7% 1970-74 7.8% 4.1% 12.0% 1975-79 8.2% 5.1% 13.3% 1980-84 6.4% 7.7% 14.0% 1985-89 7.0% 8.0% 15.1% 1990-94 7.2% 6.8% 14.0% 1995-99 9.4% 5.3% 14.8% 20009.4% 5.6% 15.0%
Re: Re: increasing profit rates
From Douglas Dowd's newly published "Capitalism and its Economics: a critical history" (Pluto Press): "One need not be enamored of corporate profits to believe that within the framework of a capitalist economy profits going to those involved in production are more likely to be positive for the economy than incomes derived from sheer ownership of, let alone mere speculation in, financial assets. In that connection the statistical tendency after 1949 is riveting: Corporate profits were more than ten times as high as net interest in 1949; more than five times in 1959; more than two-and-half times in 1969; a quarter more in 1979; in 1989 and since corporate profits have been less than net interest." Louis Proyect The Marxism mailing-list: http://www.marxmail.org
Re: RE: RE: RE: increasing profit rates
Lisa Ian Murray wrote: The rest, including technology, is guesswork, IMO. mbs === What would need to happen to get adequate metrics for the other factors? I've just been reading some papers estimating the contribution of trade to widening wage inequality. The estimates range from 2% to 40%. No one knows, and no one can quantify them. Union types choose the 40% figure, because they like it, and orthodox types choose the 2% one because they like it. Speaking of econometrics, what's with the "zero profit" assumption? Doug
RE: increasing profit rates
Behind high profits are low real wages for most categories of production workers (during a period of good economic growth). These low real wages are the product of in part a changed cultural landscape. This, in turn, was consciously created by firms and their friends in the 1970s and 1980s. Firms cant just treat their workers badly. They must have reasons that are seen as justified by society as a whole. A whole set of reasons for treating workers badly are now accepted by society (or at least by the mass media). The 1970s inflation gave us: We must fight inflation (by keeping wages from growing too fast). OPEC actions in the 1970s and imports into key industries in the 1980s (due largely to the strong dollar) gave us We must win against those foreigners (by keeping wages from growing too fast). The latter also taught firms that if they could CLAIM financial trouble, they could often successfully push for lower real wages (even if the firm really wasnt in financial troubles). This gave us, We must keep wages low because of our financial troubles, but it really isnt our (i.e., the firms) fault but is external circumstances (globalization, recession, etc) force us to act this way. Globalization is often used today in this way Dont blame us as we are forced to act this way by the even increasing globalized economy, bla, bla). Sometimes I think globalization is less a description of the facts than an ideological tool used by firms against workers. Also important is the rise in the 1990s of the CULT OF THE STOCK MARKET. The stock market demands that we . You see it really isnt our fault it is the stock markets fault and we are all, after all, now stock market investors as the mass media tells us so . Eric Eric Nilsson Economics California State University, San Bernardino San Bernardino, CA 91711 [EMAIL PROTECTED] winmail.dat
