Re: Estimating the surplus\Doug's question\Fred's comments
Paul, thanks for your comments. My responses below.
On Fri, 12 Dec 2003, Paul wrote:
Fred,
Very glad you could make it - you were missed! I want to think more about
your post but have one small and one larger reflection.
1. I think we can all agree on the big focus of profit rates, as Paul
put it - that the rate of profit is the most important variable in
analyzing capitalism. And I agree with Paul that this emphasis on profit
and the rate of profit is what distinguishes classical-Marxian theories
from neo-classical theories.
In addition to Doug's main point ('show me the benefit of all this'), Doug
does make me wonder whether my description of the Classical/Marxian
approach should have been more specific (although the change might prove
more narrow-minded). As you know well, historically, the Classical
tradition focused on profits/profit rate but broke this down into the
changes that emerge from the labor\capital shares AND the changes that
emerge from what I was calling the 'capital side' (with lots of differences
and inconsistencies among Classical authors). Of course, since Sraffa
there has been an intelligent and articulate revival of interest in
Classical presentations of the first issue (wage/profit frontiers, etc)
WITHOUT the capital side. The discussion with Doug illustrates a point:
without the 'capital side' just how useful is such a presentation? Doug
gave good examples of how similar arguments could be made sticking to a
Keyensian\Kaleckian tradition that is more accessible to most. (Of course
Doug is also skeptical of the value of this approach even with the capital
side, but that is a different discussion.)
I agree that the capital side (i.e. the composition of capital) is an
important determinant of the rate of profit. (I prefer to discuss this in
terms of Marx's concept of the composition of capital, rather than the
mainstream concept of the productivity of capital which I think is
misleading.) The increase in the composition of capital in the early
postwar period was an important cause of the decline of the rate of profit
in that period, and the decrease in the composition of capital in recent
decades has been the main cause of the partial recovery of the rate of
profit. So clearly, theory and analysis of the rate of profit should
include the composition of capital.
I also agree that this is an important distinguishing feature of Marx's
theory, in contrast to Ricardo's theory and Sraffa's theory and all other
economic theories, which if they consider the rate of profit at all,
generally consider only the share of profit and ignore the composition of
capital.
...
6. I have suggested another explanation of these important trends, one
based on Marx's distinction between productive labor and unproductive
labor - that an important cause of the declines in the share and the rate
of profit was a very significant increase in the ratio of unproductive
labor to productive labor. I am not sure that this is the correct
explanation of these trends, but I think it may be, and I think that it
worthwhile to at least consider what Marx's theory implies about the
causes of these trends and the likely prospects for the future.
And one important advantage that this theory has over the profit squeeze
explanation is that it provides a consistent explanation of why the share
and rate of profit have only partially recovered in recent decades, in
spite of the loss of workers' power and stagnant real wages - because the
ratio of unproductive to productive labor has continued to increase.
This theory also provides an important prediction about the future - that
if the ratio of unproductive to productive labor continues to increase (as
I expect), then the recovery of the share and rate of profit will continue
to be slow and partial, thus leading to more wage cuts, speed-up,
etc. According to this theory, the US economy is definitely NOT at the
beginning of another long-wave period of growth and prosperity, similar
to the early postwar period (with steady real wage increases). The only
partial recovery of the share and rate of profit makes such a return to
more prosperous conditions very unlikely.
You have made me think about what is the nature of a long wave
upturn. Here are some quick thoughts and concerns.
1. a. Of course these are waves, not cycles (as in Kondratieff,
investment-accelerator, etc). It is not even as if a simple mechanism such
as the falling of the price of capital in a downturn will, in
itself, produce an upturn.
b. The up and the down of these waves are not symmetrical. While
there are forces common and inherent in the accumulation process to
downturns (tendencies to a rising OCC, etc), the upturns require
exceptional events that are not inherently produced by the downturn
process. Mostly these require some combination of major technological
change AND socio-political
Re: Estimating the surplus\Doug's question
Hi Jim, thanks for your good questions. A few responses below. On Fri, 12 Dec 2003, Devine, James wrote: Hi, Fred. you write: 6. I have suggested another explanation of these important trends, one based on Marx's distinction between productive labor and unproductive labor - that an important cause of the declines in the share and the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. I am not sure that this is the correct explanation of these trends, but I think it may be, and I think that it worthwhile to at least consider what Marx's theory implies about the causes of these trends and the likely prospects for the future. And one important advantage that this theory has over the profit squeeze explanation is that it provides a consistent explanation of why the share and rate of profit have only partially recovered in recent decades, in spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. A big question: _why_ does the ratio of unproductive to productive labor increase over time? if this ratio is squeezing profits, it seems that profit-seeking capitalists would make an effort to lower it. or is there some sort of technological or social imperative that pushes capitalists to increase the ratio anyway? or is it a matter of it being good for capitalists as individuals to raise the ratio even though it's bad for capital as a whole? This is indeed a big and important question, and I think the answer is a combination of the types of things that you have suggested. I discuss this question at some length in Chapter 5 of my 1992 book (The Falling Rate of Profit in the Postwar US Economy). It is complicated because the category of unproductive labor is a mixed bag of different kinds of labor (circulation labor and supervisory labor and subgroups of each), and the increase of each of these different kinds of unproductive labor may be due to different causes. The main conclusion that I came to in this chapter is that the main cause of the increase of circulation labor (roughly two-thirds of the total) is that during this period the productivity of productive labor increased faster than the productivity of sales labor, thereby requiring a relative increase of the latter in order to sell the more rapidly increasing output of the former. The classic example is the auto industry. The quantity of autos produced per productive worker increases much more rapidly than the quantity of autos sold by salesperson (which remains a largely labor-intensive, person-to-person activity). An interesting corollary of this explanation is that the computer revolution has been one way to increase the productivity of unproductive labor, and therefore slow down the increase in the number of unproductive workers. Indeed, much of the computer revolution has been aimed at reducing unproductive labor (sales, accounting, debt-credit, etc.). Therefore, Marx's theory suggests that the rapid development of computer technology in recent decades has been due in part to the systematic imperative to reduce unproductive labor in order to restore the rate of profit. alternatively, it could be that the geographical unit of analysis is wrong. What if the US-based operations of capital are specializing in what Marxists term unproductive labor, while exporting the productive jobs to other countries? In that case, we should be calculating the world-wide rate of profit, no? Yes, I think the increasing geographical specialization of recent decades (productive labor in the rest of the world, unproductive labor in the US) is part of the explanation of the relative increase of unproductive labor in the US. This theory also provides an important prediction about the future - that if the ratio of unproductive to productive labor continues to increase (as I expect), then the recovery of the share and rate of profit will continue to be slow and partial, thus leading to more wage cuts, speed-up, etc. According to this theory, the US economy is definitely NOT at the beginning of another long-wave period of growth and prosperity, similar to the early postwar period (with steady real wage increases). The only partial recovery of the share and rate of profit makes such a return to more prosperous conditions very unlikely. why can't the ratio of unproductive to productive spending change quickly in the future? didn't something like that happen in the 1990s, lowering the ratio? One indicator of what happened can be seen in Michael Reich's 1998 article Are U.S. Corporations Top-Heavy? Managerial Ratios in Advanced Capitalist Countries (in the REVIEW OF RADICAL POLITICAL ECONOMICS, vol. 30, no. 3, 33-45). Reich's data on p. 37 show a rise in the management ratio until 1982 or so -- fitting with David Gordon's fat and
Re: Estimating the surplus\Doug's question
On Fri, 12 Dec 2003, paul phillips wrote: Devine, James wrote: Hi, Fred. you write: spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. A big question: _why_ does the ratio of unproductive to productive labor increase over time? if this ratio is squeezing profits, it seems that profit-seeking capitalists would make an effort to lower it. or is there some sort of technological or social imperative that pushes capitalists to increase the ratio anyway? or is it a matter of it being good for capitalists as individuals to raise the ratio even though it's bad for capital as a whole? why the ratio rises is important. For example, if we posit that demand-side stagnation has been the rule of late, that would push up the ratio (for a few years, at least) in that unproductive labor is typically overhead labor, while productive labor is laid off. However, this explanation doesn't fit the waves of downsizing (thinning out of management, etc.) that hit US business during the 1990s. (see below) Jim, I tried to offer one suggestion in my post a few days ago. In the 1970s, corporations attempted to restore the profit level through price increases (leading to a price-wage spiral) which was cut off by the recession of the 1980s. Since that time, we have been in a period of demand constraint. As a result, increasing productivity has been met by downsizing and wage restraint resulting in stagnant wages which leads, as you point out, to an underconsumption undertow. Major corporations respond to this demand constraint by increasing promotion, marketing and advertising thereby increasing the ratio of unproductive to productive labour. But given globalisation and Asian competition, firms can't raise prices to match the increased cost of unproductive labour. They respond by trying to cut managers, etc. In the 1990s, they were aided by technological change in white collar work (i.e. computerization) which reduced the relative demand for/employment of unproductive labour. (My figures for Canada indicate a significant decline in the employment of certain types of secretarial and clerical labour in the early 1990s.) But given the deflationary effect of global competition using low-wage 3rd world labour, 1st world corporations are unable to raise prices to restore (realized) profitability. Thus, the profit recovery in the 1990s was only partial in the light of continuing need to increase unproductive selling/marketing expenditures despite the rise in productive worker productivity. To the extent that the growth in non-productive worker productivity is on a declining projectory, there is little to give hope for a new long-term, profit-based expansion based on technological change, at least in North America and Europe where the ratio of productive to unproductive labour is already so low. I think my read on this is similar to Fred's. If not, I would be glad to hear, and if so, why? Paul, yes, I think our readings are very similar. Would you please send me any articles that you have written on this subject (or the references)? I look forward to further discussion. Comradely, Fred
Re: Estimating the surplus\Doug's question\Fred's comments
On Fri, 12 Dec 2003, Mike Ballard wrote: I'm obviously not an economist. Just a wondering Wobbly, Mike, what a great description! I wish there were more wondering Wobblies! Comradely, Fred
Re: Estimating the surplus\Doug's question
On Fri, 12 Dec 2003, Devine, James wrote: Paul,. your story makes sense (though I'd add a lot). My question is for Fred, though. The classical Marxian story stresses the role of the organic composition rising due to some societal or technological imperative. For Fred, the rise of the ratio of productive to unproductive labor costs has replaced -- or now complements -- that's story. I wanted to know his logic. Jim, I argue that the increase of unproductive labor complements the increase of the composition of capital. The rate of profit varies inversely with both of these, and varies positively with the rate of surplus-value. The simple algebra of this Marxian theory of the conventional rate of profit is as follows (as I am sure you know): RP = P / K = S - U / C + Ku = [ S/V - U/V ] / [ C/V + Ku/V ] Comradely, Fred
Re: Estimating the surplus\Doug's question\Fred's comments
On Sat, 13 Dec 2003, Doug Henwood wrote: Fred Mosley wrote: 6. I have suggested another explanation of these important trends, one based on Marx's distinction between productive labor and unproductive labor - that an important cause of the declines in the share and the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. I am not sure that this is the correct explanation of these trends, but I think it may be, and I think that it worthwhile to at least consider what Marx's theory implies about the causes of these trends and the likely prospects for the future. And one important advantage that this theory has over the profit squeeze explanation is that it provides a consistent explanation of why the share and rate of profit have only partially recovered in recent decades, in spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. This theory also provides an important prediction about the future - that if the ratio of unproductive to productive labor continues to increase (as I expect), then the recovery of the share and rate of profit will continue to be slow and partial, thus leading to more wage cuts, speed-up, etc. According to this theory, the US economy is definitely NOT at the beginning of another long-wave period of growth and prosperity, similar to the early postwar period (with steady real wage increases). The only partial recovery of the share and rate of profit makes such a return to more prosperous conditions very unlikely. Why should a national economy be the unit of analysis? Why can't U.S. capitalists and a significant portion of the U.S. population propser by appropriating the SV produced by, say, Chinese workers? Wal-Mart is a profit machine - is it productive or unproductive? Hi Doug, you are right that the appropriate unit of analysis is the world economy, and that surplus-value produced by e.g. Chinese workers is appropriated by US capitalists. But since this surplus-value is appropriated by US capitalists, it is mostly included in the estimates of profits in the US NIPAs. But this international aspect does mean that the estimates of the ratio of unproductive labor to productive labor in the US are overestimated. Comradely, Fred
Re: Estimating the surplus\Doug's question
On Sat, 13 Dec 2003, Doug Henwood wrote: Fred B. Moseley wrote: 5. The most popular radical-Marxian explanation of these profit rate trends has been the reserve army profit squeeze theory - that low unemployment rates in the late 1960s and early 1970s increased workers power, and enable them to gain substantial wage increases and to squeeze profits. This theory then explains the increase in the rate of profit on the higher rates of unemployment and the loss of workers' power in recent decades. This seems to be Doug's explanation of these trends. However, this profit squeeze theory does not provide a very good explanation of the only-partial recovery of the rate of profit, and especially the share of profit, in recent decades. One would think that, if greater worker power leading to wage increases in the 1960s and 70s caused the profit share to decline, then surely the last three decades of wage-cuts, speed-up on the job, and the general attack on workers and unions should have fully restored the profit share by now. Why fully restored? The 1950s and 1960s were a Golden Age with few if any historical precedents that followed the worst depression in history. The corporate sector had net losses in 1932 and 1933, something it's never come close to replicating since. But the corporate profit share of GDP rose from the low of 5.2% in 1982 to 8.7% in 1997, a 67% increase. Sure it's below the 10-11% levels of the mid-1960s, but it's a major recovery. And though I haven't gotten a chance to analyze the latest benchmark revision of the NIPAs, they show a very substantial rise in profits in 2001 and 2002 - an amazing performance in a recession and weak recovery. You are comparing a cyclical low (1982) with a cyclical high (1997). And do your estimates include interest? The estimates of the (profit + interest) share show cyclical ups and downs, but very little overall increase since the 1970s. The 1982-97 and 2001-2002 profit recoveries happened despite an increase in what you call unproductive labor. Why? In part because of the cyclical effects of higher capacity utilization rates, but also over the long-term because of a very significant increase in the rate of surplus-value, the ratio of the surplus-value produced by productive workers to the wages of productive workers (S/V in the following equation for the Marxian determination of the conventional rate of profit, included in a prior post): RP = P / K = S - U / C + Ku = [ S/V - U/V ] / [ C/V + Ku/V ] Comradely, Fred
Re: Estimating the surplus\Doug's question
Fred B. Moseley wrote: You are comparing a cyclical low (1982) with a cyclical high (1997). And do your estimates include interest? 1997 was four years before the cyclical high, actually. But the 1982 low was in many ways - political as well as economic - a point of structural reversal. Mexico's debt crisis marked the onset of neoliberal restructuring of the world; the stock market took off at almost the same minute as the Mexican quasi-default; and the Reagan boom was about to begin. That was about a lot more than a business cycle - it was about a whole new regime of accumulation. Doug
Re: Estimating the surplus\Doug's question\Fred's comments
Fred B. Moseley wrote: Hi Doug, you are right that the appropriate unit of analysis is the world economy, and that surplus-value produced by e.g. Chinese workers is appropriated by US capitalists. But since this surplus-value is appropriated by US capitalists, it is mostly included in the estimates of profits in the US NIPAs. But this international aspect does mean that the estimates of the ratio of unproductive labor to productive labor in the US are overestimated. Comradely, Fred I think there has also been a tendency to forget and neglect the expropriation of surplus from independent commodity production that has occured in the past that has been a major factor in profits, including in the 'golden age of capitalism'. Perhaps the most important sector was agriculture where surplus in production was expropriated through monopoly power (agribusiness the railways, banks) and shows up as profits of agribusiness, railways, banks, food processors, etc. The depressed state of primary agricutlture (fisheries, independent forestry operators) has meant that there has been precious little surplus to expropriate through the monopolized price mechanism. I would suggest that this may also be a factor in the failure of the profit rate to recover to the levels of the golden age. Paul Phillips, Economics, University of Manitoba
Re: Estimating the surplus\Doug's question
On Sun, 14 Dec 2003, Doug Henwood wrote: Fred B. Moseley wrote: You are comparing a cyclical low (1982) with a cyclical high (1997). And do your estimates include interest? 1997 was four years before the cyclical high, actually. But the 1982 low was in many ways - political as well as economic - a point of structural reversal. Mexico's debt crisis marked the onset of neoliberal restructuring of the world; the stock market took off at almost the same minute as the Mexican quasi-default; and the Reagan boom was about to begin. That was about a lot more than a business cycle - it was about a whole new regime of accumulation. And my point is that this new regime of accumulation - whose main purpose was to restore the rate of profit - has been only partially successful. 1997 was the peak for the share and rate of profit, as you must know, after which they declined sharply, so that the share of profit in 2001 was almost as low as in 1982. Doug, do you think that profit has been restored to such an extent that the US economy is entering a new long-wave period of growth and relative prosperity, with signficant increases in average real wages? Comradely, Fred
Re: Estimating the surplus\Doug's question\Fred's comments
Paul or someone on the list...do you mean by unproductive labour, that labour which does not produce a profit for an employer of wage-labour? In the capitalist mode of production, labour is productive if it directly participates in the production of use-values as commodities which, upon sale, permit the owner of capital to privately appropriate a surplus-value (a net profit). If the goods are not sold, or not sold at a price which realises a net profit, then the labour wasn't capitalistically productive. The source of this surplus-value is ultimately always surplus-labour, and capitalist development is predicated on the ability to extract surplus-labour. What exactly the use-value (the object of human needs or wants) happens to be, is basically irrelevant, except insofar as not all use-values can, for technical or social reasons, be transformed into a saleable commodity (Marx defines a use-value as an alienable object which by its physical characteristics can satisfy a human need or want, i.e. it's not simply a question of subjective perceptions of the utility of a good or service as in neoclassical economics; some resources by their intrinsic nature are difficult to appropriate privately, or it is difficult to attach/maintain private property rights to them and transfer those rights, hence they cannot easily be turned into saleable commodities). Are you saying that a single barber who owns his shop and employs nobody and who cuts hair for a price is an example of unproductive labour whereas a bunch of hairdressers employed by a chain for wages and whose accumulated services are sold at a profit are productive? Correct, insofar as the concept of productive labour which Marx applies refers to the capitalist mode of production only, not other modes of production. A self-employed barber exploits only his own labour. But the barber might perform surplus-labour himself as well, insofar as the wages he pays himself, are less than his gross income, in which case the barber would produce and realise a surplus-value from his self-employment, i.e. his labour involves value-augmentation involving a new net product (Marx doesn't really discuss this case, because he is concerned only with the capitalist mode of production). Marx's argument however is that the general tendency of capitalist development is to substitute employment of wage-labour by the owner of capital instead of self-employed labour, i.e. to transform labour which is maybe productive according to some other criterion, into capitalistically productive labour. Although Marx does not say this, some self-employed labour can be regarded as productive in the sense of creating a new, additional surplus-value corresponding to a net addition to commodity output, whereas other self-employed labour represents rather a transfer of surplus-value. In other words, can services as well as material goods be counted as part of productive labour in this definition? The answer is yes, both goods and services qualify as output of capitalistically productive labour (actually, many services are actually goods). But it depends on whether they can be transformed into saleable commodities or not, and what type of goods and services they are. But Marx says that no new value can ever be created in exchange transactions themselves - consequently, the labour which operates these exchange transactions, is not productive labour because it does not create net additions to total surplus-value. At a microeconomic level, (at the level of the firm) it does seem like productive labour insofar as a surplus-value results from it. However, Marx argues this surplus-value does not represent a new value added from a macro-economic point of view, but rather a transferred surplus-value, i.e. he distinguishes between the mass of alienable use-values produced as commodities, and financial claims to these use-values. A financial service might of course also be a tradeable commodity, and indeed a financial claim (an entitlement to income, such as an equity or bond) might also be a tradeable commodity. But Marx argues essentially that these financial claims are fictitious/derived/pseudo-commodities if you like, their use-value consists only in giving the owner the ability to appropriate tangible wealth in the form of products, tangible assets or labour services, now or in the future. In the case of unequal exchange, new surplus-values do seem to arise in exchange, simply through buying cheap and selling dear but again Marx argues that in this case, we are really contending with transfers of value, and not with the creation of new additional values through exchange processes. That is to say, claims to wealth are established through trading institutions and practices, such that the gross income which the producer receives, no longer reflects in any way the real final sale value of the goods he produces; the final sale value is much higher, and this value includes costs which represent
Re: Estimating the surplus\Doug's question\Fred's comments
a capitalist might figure that so and so much amount of fixed capital depreciates into so and so many commodities over say five years and then the piece of fixed capital is replaced. But what happens when the technological advance is so rapid that the old calculation is off by years? Normally, depreciation schedules are fixed by law for taxation purposes, and the tax regime changes over time, but depreciation can be modified by the government to provide investment incentives, by the market valuation of fixed assets (discrepancy between historic cost, replacement cost and market value of assets), by physical circumstances affecting the deterioriation or conservation of asset values, by insurance costs, by the price inflation rate, and by creative accounting. Often depreciation write-offs will hide undistributed profits, i.e. they do not truly reflect the actual consumption of fixed capital, i.e. the transfer of the value of fixed capital to output produced. That is to say, depreciation schedules implemented are crucial for the amount of distributed and undistributed profits. The same applies here as applies to the valuation of inventories - by valuing inventories differently (because of market price fluctuations), profit figures can be boosted or lowered. In national accounts, the consumption of fixed capital often contains insurance premiums, which are regarded as part of the costs of owning fixed assets. For Marx, however, insurance premiums are faux frais of production (incidental expenses). Jurriaan
Re: Estimating the surplus\Doug's question\Fred's comments
In the non-short run, fixed capital isn't even fixedit's as malleable as wax, just like the institutions that make 'it' what 'it' is. For accounting purposes, fixed capital is normally defined as tangible durable assets held for one year or more. For Marx, the distinction between circulating and fixed capital is purely relative however, and it relates exclusively to the turnover time of productive constant capital. Fixed capital comprises assets held and used for several production periods (during several turnovers of circulating capital). This is discussed in chapter 8 of Marx's book Capital Volume 2. Other things being equal, the faster the turnover of capital, the larger the rate of profit is, because for each unit of profit there is a smaller unit of capital invested. However, in the history of capitalist development contradictory process are involved. The rising organic composition of capital means that an increasing portion of the total capital outlay consists of fixed assets (around 70-80% on average). But the obsolescence of fixed capital (what Marx calls moral depreciationas distinct from physical depreciation) also occurs more quickly. This means in some cases, that when a large plant is built, it is technically obsolescent by the time its construction is completed, because of technological changes and cheaper production methods of fixed equipment. This topic is covered in more detail by Ernest Mandel in the chapter Acceleration of the turnover time of capital in his book Late Capitalism. However, as a historical generalisation, the acceleration of the turnover of circulating constant capital is faster than the acceleration of fixed capital. More efficient means of communication and data transmission facilitate in the increase in the turnover of capital. J.
Re: Estimating the surplus\Doug's question\Fred's comments
I suspect that the measurement of profit rates is a very, very inexact exercise, because the denominator cannot be measured. I believe this is a mistake. Of course it can be measured, but not very accurately. But only an empiricist believes in perfect data. The rest of us understand more about the limitations of accounting and survey methods, and thus regard the data only as an indicator of a trend referring to how a relationship evolves over time. Invested capital requires some means of calculating depreciation rates. The government does this calculation by means of rules of thumb based on the permanent inventory method. Well you can do it in two ways - you can total up book values for fixed assets year by year, or establish a benchmark figure and extrapolate asset values on the basis of the perpetual inventory method. This method involves adding on the value of net additions to fixed assets year by year, using a capital expenditure price index which adjusts asset values for price inflation, and using depreciation rate assumptions for different types of assets. The problem is really that the data collected or compiled involves adding up asset values calculated variously according to historic cost, current replacement cost, and current market value, i.e. the valuation is not homogenous at base level and the owner may not even know exactly what the asset is worth. Indeed, the fluctuations in replacement costs and market values directly affect the rate of disposal of fixed assets, and the value of the assets is co-determined by the yield on those assets. Nevertheless it is possible to get some indicators of the trend (see the appendix to Glyn/Sutcliffe/Harrison, Capitalism Since World War 2). The OECD site has discussion papers on what the estimation problems in the area of fixed capital stocks are, and these are also discussed in T.P. Hill, Profits and rates of Return, an OECD publication). Another problem less often mentioned is simply the statistical coverage of fixed assets in surveys. Over a short period of time, problems with this method of calculation will not cause too much difficulty as long as the business cycle does not move too rapidly, but measurement over decades is exceedingly questionable. That is probably true; both because of changes in the price structure of capital costs, and changes in real or imputed depreciation. The data can give you a rough idea about what's happening, but not with the exactitude that we pretend in journal articles. I agree. Jim's mention of Reich's article is interesting. I suspect that a rising amount of unproductive labor can be an effect as well as a cause of a falling rate of profit. I'm thinking of periods when capital cannot make much profit from direct production, and thus reverts to more financial manipulation in lieu of production. That is correct. According to Marx, an economic crisis or period of economic stagnation is the way by which the law of value asserts itself, i.e. it is the way in which viable economic proportions in the cost structure of production are restored - inputs and outputs are devalued or revalued by market failure. Basically this takes the observable form of restructuring, asset stripping, reorganisation and rationalisation, and in turn, this is accomplished through corporate mergers and takeovers (what Marx calls the centralisation of capital). One of the financial advantages of this restructuring is that budgets can be changed so that costs and incomes can be ascribed to different entities than previously, and by that process, you can show a net profit purely through making institutional changes, without changing production technique at all. Meantime growing unemployment depresses labour costs. But growing unemployment also means that ordinary consumers can buy fewer consumer durables and perishables. Consequently, production shifts increasingly to luxury consumption and armaments production because only the wealthy have the additional buying power that sustains output growth. If the growth rate of the total volume of profit declines, then the only way to increase profits may be to take profits from another sector. The data suggest that average rates of profit realised on equity in the financial, real estate, trade and insurance sector are on average higher now than in real production. Many different factors are involved, including state policy (including manipulating real interest rates and tax regimes), the concentration of capital, better credit facilities, the shifts in the international division of labour, unequal exchange, the OCC and productivity of labour in primary and secondary sectors, risk factors, the relative turnover-times of capital, improved transport and communication technology, and so on. As I said in a previous mail, social accounts do not operate a consistent distinction between new and conserved value, because they cannot define the source of value beyond noting a net income gain in
Re: Estimating the surplus\Doug's question\Fred's comments
Fred Mosley wrote: 6. I have suggested another explanation of these important trends, one based on Marx's distinction between productive labor and unproductive labor - that an important cause of the declines in the share and the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. I am not sure that this is the correct explanation of these trends, but I think it may be, and I think that it worthwhile to at least consider what Marx's theory implies about the causes of these trends and the likely prospects for the future. And one important advantage that this theory has over the profit squeeze explanation is that it provides a consistent explanation of why the share and rate of profit have only partially recovered in recent decades, in spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. This theory also provides an important prediction about the future - that if the ratio of unproductive to productive labor continues to increase (as I expect), then the recovery of the share and rate of profit will continue to be slow and partial, thus leading to more wage cuts, speed-up, etc. According to this theory, the US economy is definitely NOT at the beginning of another long-wave period of growth and prosperity, similar to the early postwar period (with steady real wage increases). The only partial recovery of the share and rate of profit makes such a return to more prosperous conditions very unlikely. Why should a national economy be the unit of analysis? Why can't U.S. capitalists and a significant portion of the U.S. population propser by appropriating the SV produced by, say, Chinese workers? Wal-Mart is a profit machine - is it productive or unproductive? Doug
Re: Estimating the surplus\Doug's question
Fred B. Moseley wrote: 5. The most popular radical-Marxian explanation of these profit rate trends has been the reserve army profit squeeze theory - that low unemployment rates in the late 1960s and early 1970s increased workers power, and enable them to gain substantial wage increases and to squeeze profits. This theory then explains the increase in the rate of profit on the higher rates of unemployment and the loss of workers' power in recent decades. This seems to be Doug's explanation of these trends. However, this profit squeeze theory does not provide a very good explanation of the only-partial recovery of the rate of profit, and especially the share of profit, in recent decades. One would think that, if greater worker power leading to wage increases in the 1960s and 70s caused the profit share to decline, then surely the last three decades of wage-cuts, speed-up on the job, and the general attack on workers and unions should have fully restored the profit share by now. Why fully restored? The 1950s and 1960s were a Golden Age with few if any historical precedents that followed the worst depression in history. The corporate sector had net losses in 1932 and 1933, something it's never come close to replicating since. But the corporate profit share of GDP rose from the low of 5.2% in 1982 to 8.7% in 1997, a 67% increase. Sure it's below the 10-11% levels of the mid-1960s, but it's a major recovery. And though I haven't gotten a chance to analyze the latest benchmark revision of the NIPAs, they show a very substantial rise in profits in 2001 and 2002 - an amazing performance in a recession and weak recovery. The 1982-97 and 2001-2002 profit recoveries happened despite an increase in what you call unproductive labor. Why? Doug
Re: Estimating the surplus\Doug's question
paul phillips wrote: Since that time, we have been in a period of demand constraint. Not hardly in the U.S. The 1990s expansion was the most consumption-intensive in history. The MPC was something like 104% measured over the whole cycle. It's been something like 99% since the early-2001 peak. Doug
Re: Estimating the surplus\Doug's question
--- Doug Henwood [EMAIL PROTECTED] wrote: The MPC was something like 104% measured over the whole cycle. It's been something like 99% since the early-2001 peak. What does MPC stand for? Mike B) = * Where parents do too much for their children, the children will not do much for themselves. ELBERT HUBBARD (1856-1915) The Note Book of Elbert Hubbard ed., Elbert Hubbard II p. 193 http://profiles.yahoo.com/swillsqueal __ Do you Yahoo!? Free Pop-Up Blocker - Get it now http://companion.yahoo.com/
Re: Estimating the surplus\Doug's question
MPC is marginal propensity to consume. It is equal to the change in consumption divided by the change in income. An MPC of .99 would tell us that as consumer income rises by a dollar, consumption rises by 99 cents. One of 1.04 means that an increase in income of a dollar was associated with a rise in consumption of $1.04. Michael Yates - Original Message - From: Mike Ballard To: [EMAIL PROTECTED] Sent: Saturday, December 13, 2003 1:56 PM Subject: Re: [PEN-L] Estimating the surplus\Doug's question --- Doug Henwood [EMAIL PROTECTED] wrote:The MPC was something like 104% measured over the whole cycle. It's been something like 99% since the early-2001 peak.What does MPC stand for?Mike B)=*Where parents do too much for their children,the children will not do much for themselves.ELBERT HUBBARD (1856-1915)The Note Book of Elbert Hubbarded., Elbert Hubbard IIp. 193http://profiles.yahoo.com/swillsqueal__Do you Yahoo!?Free Pop-Up Blocker - Get it nowhttp://companion.yahoo.com/
Re: Estimating the surplus\Doug's question
Thank-you Michael! Mike B) --- MICHAEL YATES [EMAIL PROTECTED] wrote: MPC is marginal propensity to consume. It is equal to the change in consumption divided by the change in income. An MPC of .99 would tell us that as consumer income rises by a dollar, consumption rises by 99 cents. One of 1.04 means that an increase in income of a dollar was associated with a rise in consumption of $1.04. = * Where parents do too much for their children, the children will not do much for themselves. ELBERT HUBBARD (1856-1915) The Note Book of Elbert Hubbard ed., Elbert Hubbard II p. 193 http://profiles.yahoo.com/swillsqueal __ Do you Yahoo!? New Yahoo! Photos - easier uploading and sharing. http://photos.yahoo.com/
Re: Estimating the surplus\Doug's question
Mike Ballard wrote: --- Doug Henwood [EMAIL PROTECTED] wrote: The MPC was something like 104% measured over the whole cycle. It's been something like 99% since the early-2001 peak. What does MPC stand for? Marginal propensity to consume. The percentage of growth in income which is consumed. For example if your income in year 1 was 10,000 and your consumption 9,000, and in year 2 it was 11,000 and consumption 10,200, your MPC would be computed as: income growth: 11,000-10,000 = 1,000 consumption growth: 10,200-9,000 = 1,200 MPC = 1,200/1,000 = 1.2 or 120%. Doug
Re: Estimating the surplus\Doug's question
--- Doug Henwood [EMAIL PROTECTED] wrote: Marginal propensity to consume. The percentage of growth in income which is consumed. For example if your income in year 1 was 10,000 and your consumption 9,000, and in year 2 it was 11,000 and consumption 10,200, your MPC would be computed as: income growth: 11,000-10,000 = 1,000 consumption growth: 10,200-9,000 = 1,200 MPC = 1,200/1,000 = 1.2 or 120%. Thanks Doug! Mike B) = * Where parents do too much for their children, the children will not do much for themselves. ELBERT HUBBARD (1856-1915) The Note Book of Elbert Hubbard ed., Elbert Hubbard II p. 193 http://profiles.yahoo.com/swillsqueal __ Do you Yahoo!? New Yahoo! Photos - easier uploading and sharing. http://photos.yahoo.com/
Re: Estimating the surplus\Doug's question
Are there other numbers to tell us how much of this is comsumption to physically survive? Joanna Doug Henwood wrote: Mike Ballard wrote: --- Doug Henwood [EMAIL PROTECTED] wrote: The MPC was something like 104% measured over the whole cycle. It's been something like 99% since the early-2001 peak. What does MPC stand for? Marginal propensity to consume. The percentage of growth in income which is consumed. For example if your income in year 1 was 10,000 and your consumption 9,000, and in year 2 it was 11,000 and consumption 10,200, your MPC would be computed as: income growth: 11,000-10,000 = 1,000 consumption growth: 10,200-9,000 = 1,200 MPC = 1,200/1,000 = 1.2 or 120%. Doug
Re: Estimating the surplus\Doug's question
joanna bujes wrote: Are there other numbers to tell us how much of this is comsumption to physically survive? There was a Fed study published in 2001 http://www.federalreserve.gov/pubs/feds/2001/200121/200121abs.html that argued that it was mostly driven by the upper quintile of the distribution, flush from stock market gains (either financially or psychologically). Doug
Re: Estimating the surplus\Doug's question
Doug Henwood wrote: joanna bujes wrote: Are there other numbers to tell us how much of this is comsumption to physically survive? There was a Fed study published in 2001 http://www.federalreserve.gov/pubs/feds/2001/200121/200121abs.html that argued that it was mostly driven by the upper quintile of the distribution, flush from stock market gains (either financially or psychologically). Doug O, reason not the need: our basest beggars Are in the poorest thing superfluous: Allow not nature more than nature needs, Man's life's as cheap as beast's: thou art a lady; If only to go warm were gorgeous, Why, nature needs not what thou gorgeous wear'st, Which scarcely keeps thee warm. But, for true need,-- King Lear
Re: Estimating the surplus\Doug's question
paul phillips wrote: Since that time, we have been in a period of demand constraint. Not hardly in the U.S. The 1990s expansion was the most consumption-intensive in history. The MPC was something like 104% measured over the whole cycle. It's been something like 99% since the early-2001 peak. Doug But, despite the higher-than-ever MPC, the problem could still be demand constraint, right? Underconsumption is really over-accumulation -- too much investment-seeking wealth at the top -- right? (Not enough new buyers to justify building new factories/hiring new workers.) So, even if people are spending like mad, isn't it possible that investors _still_ can't find enough new markets to justify enough new investment to make the economy grow quickly? If plebe spending-power doesn't rise quickly, where _does_ a blueblood put his/her dividends and capital gains? Doesn't this kind of demand constraint explain the pattern we're in -- high profit and productivity gains yet continuing job losses and quasi-recession? Too much money at the top. After Reagan/Bush/Clinton, the system has been fixed so that it works according to capital's logic, with less interference from (non-military) Keynesian forces. The only problem is that capital's logic only knows one solution -- push harder on productivity gains and trim workforces even more. Lather, rinse, repeat...
Re: Estimating the surplus\Doug's question
Oh, I wasn't being puritannical and Lear was just another big male baby who failed to see that we must endure our going forth, even as our coming hither. -- brutal but true... Joanna Carrol Cox wrote: Doug Henwood wrote: joanna bujes wrote: Are there other numbers to tell us how much of this is comsumption to physically survive? There was a Fed study published in 2001 http://www.federalreserve.gov/pubs/feds/2001/200121/200121abs.html that argued that it was mostly driven by the upper quintile of the distribution, flush from stock market gains (either financially or psychologically). Doug O, reason not the need: our basest beggars Are in the poorest thing superfluous: Allow not nature more than nature needs, Man's life's as cheap as beast's: thou art a lady; If only to go warm were gorgeous, Why, nature needs not what thou gorgeous wear'st, Which scarcely keeps thee warm. But, for true need,-- King Lear
Re: Estimating the surplus\Doug's question\Fred's comments
Fred,
Very glad you could make it - you were missed! I want to think more about
your post but have one small and one larger reflection.
1. I think we can all agree on the big focus of profit rates, as Paul
put it - that the rate of profit is the most important variable in
analyzing capitalism. And I agree with Paul that this emphasis on profit
and the rate of profit is what distinguishes classical-Marxian theories
from neo-classical theories.
In addition to Doug's main point ('show me the benefit of all this'), Doug
does make me wonder whether my description of the Classical/Marxian
approach should have been more specific (although the change might prove
more narrow-minded). As you know well, historically, the Classical
tradition focused on profits/profit rate but broke this down into the
changes that emerge from the labor\capital shares AND the changes that
emerge from what I was calling the 'capital side' (with lots of differences
and inconsistencies among Classical authors). Of course, since Sraffa
there has been an intelligent and articulate revival of interest in
Classical presentations of the first issue (wage/profit frontiers, etc)
WITHOUT the capital side. The discussion with Doug illustrates a point:
without the 'capital side' just how useful is such a presentation? Doug
gave good examples of how similar arguments could be made sticking to a
Keyensian\Kaleckian tradition that is more accessible to most. (Of course
Doug is also skeptical of the value of this approach even with the capital
side, but that is a different discussion.)
...
6. I have suggested another explanation of these important trends, one
based on Marx's distinction between productive labor and unproductive
labor - that an important cause of the declines in the share and the rate
of profit was a very significant increase in the ratio of unproductive
labor to productive labor. I am not sure that this is the correct
explanation of these trends, but I think it may be, and I think that it
worthwhile to at least consider what Marx's theory implies about the
causes of these trends and the likely prospects for the future.
And one important advantage that this theory has over the profit squeeze
explanation is that it provides a consistent explanation of why the share
and rate of profit have only partially recovered in recent decades, in
spite of the loss of workers' power and stagnant real wages - because the
ratio of unproductive to productive labor has continued to increase.
This theory also provides an important prediction about the future - that
if the ratio of unproductive to productive labor continues to increase (as
I expect), then the recovery of the share and rate of profit will continue
to be slow and partial, thus leading to more wage cuts, speed-up,
etc. According to this theory, the US economy is definitely NOT at the
beginning of another long-wave period of growth and prosperity, similar
to the early postwar period (with steady real wage increases). The only
partial recovery of the share and rate of profit makes such a return to
more prosperous conditions very unlikely.
You have made me think about what is the nature of a long wave
upturn. Here are some quick thoughts and concerns.
1. a. Of course these are waves, not cycles (as in Kondratieff,
investment-accelerator, etc). It is not even as if a simple mechanism such
as the falling of the price of capital in a downturn will, in
itself, produce an upturn.
b. The up and the down of these waves are not symmetrical. While
there are forces common and inherent in the accumulation process to
downturns (tendencies to a rising OCC, etc), the upturns require
exceptional events that are not inherently produced by the downturn
process. Mostly these require some combination of major technological
change AND socio-political conditions that allow capital to overcome
resistance to the labor processes and social organization needed to
introduce the technological change. Each upturn is sui generus in its
causes (although some may want to argue for inherent links to the
innovation and political change process, these are links with more lengthy
chains).
c. There are no inherent 'rules' about the strength or duration of
a wave. Definitions are hard to make; mostly we have relied on historical
observations to generalize about size and length.
d. History gives little guidance as to the possible economic
processes in today's world that would produce an upturn and how would one
look. The last upturn involved WWII. The one before (1890's?) had our
great-great-grandfathers at work.
2. It is fairly obvious that a large part of the upswing in profit
rates has been from a shift in shares from labor to capital. Not (by
itself) the stuff to inspire thoughts of a long upswing. But my eye was
caught by this smaller (but steady) increase in capital productivity in
Dumenil's RRPE paper. We would need to know more of the source of this
Re: Estimating the surplus\Doug's question
Hi, Fred. you write: 6. I have suggested another explanation of these important trends, one based on Marx's distinction between productive labor and unproductive labor - that an important cause of the declines in the share and the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. I am not sure that this is the correct explanation of these trends, but I think it may be, and I think that it worthwhile to at least consider what Marx's theory implies about the causes of these trends and the likely prospects for the future. And one important advantage that this theory has over the profit squeeze explanation is that it provides a consistent explanation of why the share and rate of profit have only partially recovered in recent decades, in spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. A big question: _why_ does the ratio of unproductive to productive labor increase over time? if this ratio is squeezing profits, it seems that profit-seeking capitalists would make an effort to lower it. or is there some sort of technological or social imperative that pushes capitalists to increase the ratio anyway? or is it a matter of it being good for capitalists as individuals to raise the ratio even though it's bad for capital as a whole? why the ratio rises is important. For example, if we posit that demand-side stagnation has been the rule of late, that would push up the ratio (for a few years, at least) in that unproductive labor is typically overhead labor, while productive labor is laid off. However, this explanation doesn't fit the waves of downsizing (thinning out of management, etc.) that hit US business during the 1990s. (see below) alternatively, it could be that the geographical unit of analysis is wrong. What if the US-based operations of capital are specializing in what Marxists term unproductive labor, while exporting the productive jobs to other countries? In that case, we should be calculating the world-wide rate of profit, no? This theory also provides an important prediction about the future - that if the ratio of unproductive to productive labor continues to increase (as I expect), then the recovery of the share and rate of profit will continue to be slow and partial, thus leading to more wage cuts, speed-up, etc. According to this theory, the US economy is definitely NOT at the beginning of another long-wave period of growth and prosperity, similar to the early postwar period (with steady real wage increases). The only partial recovery of the share and rate of profit makes such a return to more prosperous conditions very unlikely. why can't the ratio of unproductive to productive spending change quickly in the future? didn't something like that happen in the 1990s, lowering the ratio? One indicator of what happened can be seen in Michael Reich's 1998 article Are U.S. Corporations Top-Heavy? Managerial Ratios in Advanced Capitalist Countries (in the REVIEW OF RADICAL POLITICAL ECONOMICS, vol. 30, no. 3, 33-45). Reich's data on p. 37 show a rise in the management ratio until 1982 or so -- fitting with David Gordon's fat and mean hypothesis -- but then the ratio levels off. In the 1990s, it falls pretty steeply. This is not the same as the unproductive/productive labor ratio, but it seems close.
Re: Estimating the surplus\Doug's question\Fred's comments
--- Paul [EMAIL PROTECTED] wrote: that if the ratio of unproductive to productive labor continues to increase ** Paul or someone on the list...do you mean by uproductive labour, that labour which does not produce a profit for an employer of wage-labour? Are you saying that a single barber who owns his shop and employs nobody and who cuts hair for a price is an example of unproductive labour whereas a bunch of hairdressers employed by a chain for wages and whose accumulated services are sold at a profit are productive? Or, is that unproductive as well? In other words, can services as well as material goods be counted as part of productive labour in this definition? Paul continued: As I recall, your 1997 RRPE article was focusing on the productive\unproductive issue and so did not get into the question of productivity of capital. and 3. IF, IF there were a long-ish by very modest upturn in profit rates partly fueled by some serious capital productivity\technical change would it not still be consistent with your points on productive\unproductive labor? (The improvements in capital productivity were cut in half by the drain in unproductive labor.) And what does the productivity of capital mean? Can capital, of and by itself be productive? I mean, is there is such a measure as say, output by unit of capital? Or, are we talking Capital as a social relation here i.e. wage-labour implied? Curious, Mike B) = * So long as little children are allowed to suffer, there is no true love in this world. ISADORA DUNCAN Memoirs, 1924 This Quarter Autumn 1929 http://profiles.yahoo.com/swillsqueal __ Do you Yahoo!? Free Pop-Up Blocker - Get it now http://companion.yahoo.com/
Re: Estimating the surplus\Doug's question\Fred's comments
Mike asks: ...do you mean by uproductive labour, that labour which does not produce a profit for an employer of wage-labour? according to Marx's definition, unproductive labor (U) does not produce surplus-value, though it may help the capitalists _realize_ surplus-value. To my mind, that says that U doesn't help capital as a whole, but it can be profitable for an individual capitalist to hire. So a stock-broker can be profitable to hire, even though (s)he's not productive. Are you saying that a single barber who owns his shop and employs nobody and who cuts hair for a price is an example of unproductive labour whereas a bunch of hairdressers employed by a chain for wages and whose accumulated services are sold at a profit are productive? Marx used a similar example. A teacher hired by a business is productive, whereas a self-employed tutor is not. Note that there's nothing morally good about being productive. ... In other words, can services as well as material goods be counted as part of productive labour in this definition? for Smith, service laborers were unproductive. For Marx, they were productive in most cases. And what does the productivity of capital mean? Can capital, of and by itself be productive? the productivity of capital is sloppy writing. It refers to the ratio of output to fixed capital equipment (the inverse of some measures of the organic composition of capital). But, at least in Marxian lingo, fixed capital isn't productive. However, it can be indirectly productive, i.e., raising the productivity of productive labor. Or, are we talking Capital as a social relation here i.e. wage-labour implied? capital as a social relation is usually productive -- for capital. the more I think about this stuff, the less productive it seems. Jim
Re: Estimating the surplus\Doug's question
Devine, James wrote: Hi, Fred. you write: spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. A big question: _why_ does the ratio of unproductive to productive labor increase over time? if this ratio is squeezing profits, it seems that profit-seeking capitalists would make an effort to lower it. or is there some sort of technological or social imperative that pushes capitalists to increase the ratio anyway? or is it a matter of it being good for capitalists as individuals to raise the ratio even though it's bad for capital as a whole? why the ratio rises is important. For example, if we posit that demand-side stagnation has been the rule of late, that would push up the ratio (for a few years, at least) in that unproductive labor is typically overhead labor, while productive labor is laid off. However, this explanation doesn't fit the waves of "downsizing" (thinning out of management, etc.) that hit US business during the 1990s. (see below) Jim, I tried to offer one suggestion in my post a few days ago. In the 1970s, corporations attempted to restore the profit level through price increases (leading to a price-wage spiral) which was cut off by the recession of the 1980s. Since that time, we have been in a period of demand constraint. As a result, increasing productivity has been met by downsizing and wage restraint resulting in stagnant wages which leads, as you point out, to an underconsumption undertow. Major corporations respond to this demand constraint by increasing promotion, marketing and advertising thereby increasing the ratio of unproductive to productive labour. But given globalisation and Asian competition, firms can't raise prices to match the increased cost of unproductive labour. They respond by trying to cut managers, etc. In the 1990s, they were aided by technological change in white collar work (i.e. computerization) which reduced the relative demand for/employment of unproductive labour. (My figures for Canada indicate a significant decline in the employment of certain types of secretarial and clerical labour in the early 1990s.) But given the deflationary effect of global competition using low-wage 3rd world labour, 1st world corporations are unable to raise prices to restore (realized) profitability. Thus, the profit recovery in the 1990s was only partial in the light of continuing need to increase unproductive selling/marketing expenditures despite the rise in productive worker productivity. To the extent that the growth in non-productive worker productivity is on a declining projectory, there is little to give hope for a new long-term, profit-based expansion based on technological change, at least in North America and Europe where the ratio of productive to unproductive labour is already so low. I think my read on this is similar to Fred's. If not, I would be glad to hear, and if so, why? Paul Paul Phillips, Economics, University of Manitoba
Re: Estimating the surplus\Doug's question\Fred's comments
Thanks Jim! Now, I feel like I know about where I am in this discussion. One, perhpas two more questions from the peanut gallery: How does the pile of both current and projected future wealth production in the USA measure up against the amount of dollars in circulation, including bonds and other promissary notes? I realize that at this stage in that vast accumulation of commodities, there has to be an excess of dollars over produced exchange-values in order to grease the wheels of circulation. But how much is too much? I'm not sure of the exact figures, but aren't there trillions of dollars out there moving their little electrical impulses around from bank to bank and from exchange to exchange and so on...? From another angle, does the fall in the exchange-value of the US dollar have something to do with an excess of cash and promissary notes in circulation? I'm obviously not an economist. Just a wondering Wobbly, Mike B) --- Devine, James [EMAIL PROTECTED] wrote: Mike asks: ...do you mean by uproductive labour, that labour which does not produce a profit for an employer of wage-labour? according to Marx's definition, unproductive labor (U) does not produce surplus-value, though it may help the capitalists _realize_ surplus-value. To my mind, that says that U doesn't help capital as a whole, but it can be profitable for an individual capitalist to hire. So a stock-broker can be profitable to hire, even though (s)he's not productive. Are you saying that a single barber who owns his shop and employs nobody and who cuts hair for a price is an example of unproductive labour whereas a bunch of hairdressers employed by a chain for wages and whose accumulated services are sold at a profit are productive? Marx used a similar example. A teacher hired by a business is productive, whereas a self-employed tutor is not. Note that there's nothing morally good about being productive. ... In other words, can services as well as material goods be counted as part of productive labour in this definition? for Smith, service laborers were unproductive. For Marx, they were productive in most cases. And what does the productivity of capital mean? Can capital, of and by itself be productive? the productivity of capital is sloppy writing. It refers to the ratio of output to fixed capital equipment (the inverse of some measures of the organic composition of capital). But, at least in Marxian lingo, fixed capital isn't productive. However, it can be indirectly productive, i.e., raising the productivity of productive labor. Or, are we talking Capital as a social relation here i.e. wage-labour implied? capital as a social relation is usually productive -- for capital. the more I think about this stuff, the less productive it seems. Jim = * So long as little children are allowed to suffer, there is no true love in this world. ISADORA DUNCAN Memoirs, 1924 This Quarter Autumn 1929 http://profiles.yahoo.com/swillsqueal __ Do you Yahoo!? New Yahoo! Photos - easier uploading and sharing. http://photos.yahoo.com/
Re: Estimating the surplus\Doug's question\Fred's comments
Jim Devine writes: the productivity of capital is sloppy writing. It refers to the ratio of output to fixed capital equipment (the inverse of some measures of the organic composition of capital). But, at least in Marxian lingo, fixed capital isn't productive. However, it can be indirectly productive, i.e., raising the productivity of productive labor. Thanks a lot :-) Actually since I was citing the data from Dumenil Levy in their RRPE article, I stuck to THEIR term. It raised my eyebrows as well, but they are not sloppy people (being French?) and I suspect they are going somewhere with this so I will let it stand - for now. But it is good you clarified it. More seriously, thanks for taking on Mike's question. Paul
Re: Estimating the surplus\Doug's question\Fred's comments
an excess of money in circulation if anything means inflation. But that's something that's not happening these days. The fall of the US dollar is due to an excess of US dollars in circulation relative to the supplies of other currencies (rather than there being too much money over-all). The excess of US$ comes from the practice of excessive borrowing by US consumers, corporations, and (now) the government and the shrinking willingness of those outside the US to lend. I knew there were Wobblies in Australia, but I've never met one. Jim -Original Message- From: Mike Ballard [mailto:[EMAIL PROTECTED] Sent: Fri 12/12/2003 4:52 PM To: [EMAIL PROTECTED] Cc: Subject: Re: [PEN-L] Estimating the surplus\Doug's question\Fred's comments Thanks Jim! Now, I feel like I know about where I am in this discussion. One, perhpas two more questions from the peanut gallery: How does the pile of both current and projected future wealth production in the USA measure up against the amount of dollars in circulation, including bonds and other promissary notes? I realize that at this stage in that vast accumulation of commodities, there has to be an excess of dollars over produced exchange-values in order to grease the wheels of circulation. But how much is too much? I'm not sure of the exact figures, but aren't there trillions of dollars out there moving their little electrical impulses around from bank to bank and from exchange to exchange and so on...? From another angle, does the fall in the exchange-value of the US dollar have something to do with an excess of cash and promissary notes in circulation? I'm obviously not an economist. Just a wondering Wobbly, Mike B) --- Devine, James [EMAIL PROTECTED] wrote: Mike asks: ...do you mean by uproductive labour, that labour which does not produce a profit for an employer of wage-labour? according to Marx's definition, unproductive labor (U) does not produce surplus-value, though it may help the capitalists _realize_ surplus-value. To my mind, that says that U doesn't help capital as a whole, but it can be profitable for an individual capitalist to hire. So a stock-broker can be profitable to hire, even though (s)he's not productive. Are you saying that a single barber who owns his shop and employs nobody and who cuts hair for a price is an example of unproductive labour whereas a bunch of hairdressers employed by a chain for wages and whose accumulated services are sold at a profit are productive? Marx used a similar example. A teacher hired by a business is productive, whereas a self-employed tutor is not. Note that there's nothing morally good about being productive. ... In other words, can services as well as material goods be counted as part of productive labour in this definition? for Smith, service laborers were unproductive. For Marx, they were productive in most cases. And what does the productivity of capital mean? Can capital, of and by itself be productive? the productivity of capital is sloppy writing. It refers to the ratio of output to fixed capital equipment (the inverse of some measures of the organic composition of capital). But, at least in Marxian lingo, fixed capital isn't productive. However, it can be indirectly productive, i.e., raising the productivity of productive labor. Or, are we talking Capital as a social relation here i.e. wage-labour implied? capital as a social relation is usually productive -- for capital. the more I think about this stuff, the less productive it seems. Jim = * So long as little children are allowed to suffer, there is no true love in this world. ISADORA DUNCAN Memoirs, 1924 This Quarter Autumn 1929 http://profiles.yahoo.com/swillsqueal __ Do you Yahoo!? New Yahoo! Photos - easier uploading and sharing. http://photos.yahoo.com/
Re: Estimating the surplus\Doug's question
Paul,. your story makes sense (though I'd add a lot). My question is for Fred, though. The classical Marxian story stresses the role of the organic composition rising due to some societal or technological imperative. For Fred, the rise of the ratio of productive to unproductive labor costs has replaced -- or now complements -- that's story. I wanted to know his logic. Jim --- Devine, James wrote: Hi, Fred. you write: spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. A big question: _why_ does the ratio of unproductive to productive labor increase over time? if this ratio is squeezing profits, it seems that profit-seeking capitalists would make an effort to lower it. or is there some sort of technological or social imperative that pushes capitalists to increase the ratio anyway? or is it a matter of it being good for capitalists as individuals to raise the ratio even though it's bad for capital as a whole? why the ratio rises is important. For example, if we posit that demand-side stagnation has been the rule of late, that would push up the ratio (for a few years, at least) in that unproductive labor is typically overhead labor, while productive labor is laid off. However, this explanation doesn't fit the waves of downsizing (thinning out of management, etc.) that hit US business during the 1990s. (see below) - Jim, I tried to offer one suggestion in my post a few days ago. In the 1970s, corporations attempted to restore the profit level through price increases (leading to a price-wage spiral) which was cut off by the recession of the 1980s. Since that time, we have been in a period of demand constraint. As a result, increasing productivity has been met by downsizing and wage restraint resulting in stagnant wages which leads, as you point out, to an underconsumption undertow. Major corporations respond to this demand constraint by increasing promotion, marketing and advertising thereby increasing the ratio of unproductive to productive labour. But given globalisation and Asian competition, firms can't raise prices to match the increased cost of unproductive labour. They respond by trying to cut managers, etc. In the 1990s, they were aided by technological change in white collar work (i.e. computerization) which reduced the relative demand for/employment of unproductive labour. (My figures for Canada indicate a significant decline in the employment of certain types of secretarial and clerical labour in the early 1990s.) But given the deflationary effect of global competition using low-wage 3rd world labour, 1st world corporations are unable to raise prices to restore (realized) profitability. Thus, the profit recovery in the 1990s was only partial in the light of continuing need to increase unproductive selling/marketing expenditures despite the rise in productive worker productivity. To the extent that the growth in non-productive worker productivity is on a declining projectory, there is little to give hope for a new long-term, profit-based expansion based on technological change, at least in North America and Europe where the ratio of productive to unproductive labour is already so low. I think my read on this is similar to Fred's. If not, I would be glad to hear, and if so, why? Paul
Re: Estimating the surplus\Doug's question\Fred's comments
Thanks again, Jim. If you ever get to Perth, we'll have to have a Coopers ale (or three) at the Brass Monkey. I can bring my Little Red Songbook. Comes in handy after a few ales and hearty. So, there is an excess of money in circulation relative to the other currencies of the world. Increased supply, decreased demand and therefore lower price for the US dollar. I get it. When you refer to the others outside the US and their unwillingness to lend, is that the same thing as those others buying up US bonds and other pieces of paper which represent some future or current exchange-value and their unwillingness to risk these purchases at this moment in time? Again, thanks for your time, Mike B) --- Devine, James [EMAIL PROTECTED] wrote: an excess of money in circulation if anything means inflation. But that's something that's not happening these days. The fall of the US dollar is due to an excess of US dollars in circulation relative to the supplies of other currencies (rather than there being too much money over-all). The excess of US$ comes from the practice of excessive borrowing by US consumers, corporations, and (now) the government and the shrinking willingness of those outside the US to lend. I knew there were Wobblies in Australia, but I've never met one. Jim other posts leading up to this one deleted for brevity = * So long as little children are allowed to suffer, there is no true love in this world. ISADORA DUNCAN Memoirs, 1924 This Quarter Autumn 1929 http://profiles.yahoo.com/swillsqueal __ Do you Yahoo!? New Yahoo! Photos - easier uploading and sharing. http://photos.yahoo.com/
Re: Estimating the surplus\Doug's question\Fred's comments
My take on profit rates is a bit different from the thrust of this conversation so far. I suspect that the measurement of profit rates is a very, very inexact exercise, because the denominator cannot be measured. Invested capital requires some means of calculating depreciation rates. The government does this calculation by means of rules of thumb based on the permanent inventory method. Over a short period of time, problems with this method of calculation will not cause too much difficulty as long as the business cycle does not move too rapidly, but measurement over decades is exceedingly questionable. The data can give you a rough idea about what's happening, but not with the exactitude that we pretend in journal articles. Jim's mention of Reich's article is interesting. I suspect that a rising amount of unproductive labor can be an effect as well as a cause of a falling rate of profit. I'm thinking of periods when capital cannot make much profit from direct production, and thus reverts to more financial manipulation in lieu of production. -- Michael Perelman Economics Department California State University michael at ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: Estimating the surplus\Doug's question\Fred's comments
--- michael [EMAIL PROTECTED] wrote: Invested capital requires some means of calculating depreciation rates. The government does this calculation by means of rules of thumb based on the permanent inventory method. Over a short period of time, problems with this method of calculation will not cause too much difficulty as long as the business cycle does not move too rapidly, but measurement over decades is exceedingly questionable. * What I've wondered about are the calculations concerning the depreciation of fixed capital in these times of rapid technological advance. One never knows what's around the corner in terms of the revolutionizing of the means of production in this day and age. So, a capitalist might figure that so and so much amount of fixed capital depreciates into so and so many commodities over say five years and then the piece of fixed capital is replaced. But what happens when the technological advance is so rapid that the old calculation is off by years? I guess that the capitalist just takes a financial bath or goes out of business. But maybe not? Maybe BIG CAPITAL is not allowed to go out of business (Chrysler?) because the overall effect on the economy would be too great. Is this another avenue where excess currency is being pumped into the economy? I think that I'm over posting today. So, will stop with this one. Best to all, Mike B) = * Where parents do too much for their children, the children will not do much for themselves. ELBERT HUBBARD (1856-1915) The Note Book of Elbert Hubbard ed., Elbert Hubbard II p. 193 http://profiles.yahoo.com/swillsqueal __ Do you Yahoo!? New Yahoo! Photos - easier uploading and sharing. http://photos.yahoo.com/
Re: Estimating the surplus\Doug's question\Fred's comments
- Original Message - From: Mike Ballard [EMAIL PROTECTED] What I've wondered about are the calculations concerning the depreciation of fixed capital in these times of rapid technological advance. One never knows what's around the corner in terms of the revolutionizing of the means of production in this day and age. So, a capitalist might figure that so and so much amount of fixed capital depreciates into so and so many commodities over say five years and then the piece of fixed capital is replaced. But what happens when the technological advance is so rapid that the old calculation is off by years? In the non-short run, fixed capital isn't even fixedit's as malleable as wax, just like the institutions that make 'it' what 'it' is. Ian
Re: Estimating the surplus\Doug's question\Fred's comments
Thanks again, Jim. If you ever get to Perth, we'll have to have a Coopers ale (or three) at the Brass Monkey. I can bring my Little Red Songbook. Comes in handy after a few ales and hearty. I'll have some cheap Pinot Grigio some horizontal athletics. ... When you refer to the others outside the US and their unwillingness to lend, is that the same thing as those others buying up US bonds and other pieces of paper which represent some future or current exchange-value and their unwillingness to risk these purchases at this moment in time? Right. lending to the US is the same as buying those pieces of paper. in international solidarity, Jim
Re: Estimating the surplus\Doug's question
I have been trying to find the time to join this interesting discussion on the rate of profit in the US economy. My classes finally ended yesterday. A few comments: 1. I think we can all agree on the big focus of profit rates, as Paul put it - that the rate of profit is the most important variable in analyzing capitalism. And I agree with Paul that this emphasis on profit and the rate of profit is what distinguishes classical-Marxian theories from neo-classical theories. 2. And I think we are talking about the same rate of profit and the same share of profit - as measured by the NIPAs. I (and most others) include interest so profit means total income to capital. 3. This conventional rate of profit declined about 50% in the early postwar period, and has regained only about half of that decline since the 1970s. The profit share declined less (about 30%), but has hardly increased at all in recent decades. 4. Where we mainly disagree (as Paul has pointed out) is about the CAUSES of these important trends - the causes of the decline, and the causes of the incomplete recovery. 5. The most popular radical-Marxian explanation of these profit rate trends has been the reserve army profit squeeze theory - that low unemployment rates in the late 1960s and early 1970s increased workers power, and enable them to gain substantial wage increases and to squeeze profits. This theory then explains the increase in the rate of profit on the higher rates of unemployment and the loss of workers' power in recent decades. This seems to be Doug's explanation of these trends. However, this profit squeeze theory does not provide a very good explanation of the only-partial recovery of the rate of profit, and especially the share of profit, in recent decades. One would think that, if greater worker power leading to wage increases in the 1960s and 70s caused the profit share to decline, then surely the last three decades of wage-cuts, speed-up on the job, and the general attack on workers and unions should have fully restored the profit share by now. The average real wage in the US economy has not increased since the early 1970s and has even declined some. Meanwhile productivity has continued to increase. And yet the profit share has hardly increased at all. This seems hard to explain by the wage push profit squeeze theory 6. I have suggested another explanation of these important trends, one based on Marx's distinction between productive labor and unproductive labor - that an important cause of the declines in the share and the rate of profit was a very significant increase in the ratio of unproductive labor to productive labor. I am not sure that this is the correct explanation of these trends, but I think it may be, and I think that it worthwhile to at least consider what Marx's theory implies about the causes of these trends and the likely prospects for the future. And one important advantage that this theory has over the profit squeeze explanation is that it provides a consistent explanation of why the share and rate of profit have only partially recovered in recent decades, in spite of the loss of workers' power and stagnant real wages - because the ratio of unproductive to productive labor has continued to increase. This theory also provides an important prediction about the future - that if the ratio of unproductive to productive labor continues to increase (as I expect), then the recovery of the share and rate of profit will continue to be slow and partial, thus leading to more wage cuts, speed-up, etc. According to this theory, the US economy is definitely NOT at the beginning of another long-wave period of growth and prosperity, similar to the early postwar period (with steady real wage increases). The only partial recovery of the share and rate of profit makes such a return to more prosperous conditions very unlikely. This theory may be wrong, but it seems to me that it should at least be considered, and its economic and political implications pondered. I look forward to further discussion, as time permits. Comradely, Fred
Re: Estimating the surplus\Doug's question
Doug writes: I'd make the same argument using the real wage and the wage and profit shares of national income plus an analysis of the balance of class power. I saw that the profit rate, by my vulgar measure, fell during the 1970s and rose during the 1980s and 1990s. What happened? Unions were broken, the welfare state pared back, and a deep recession from 1980-82 scared the hell out of the working class. The profit rate fell sharply from 1997-2001 because labor markets were tight; Alan Greenspan was channelling Kalecki, saying that the pool of available workers was running dry, invoking the threat of wage inflation. As you say, tranlating the bourgeois stats into Marxian categories takes lots of work; why spend all that time crunching numbers when you could better spend it by thinking politically? Doug Yes. And this is a fine argument - on the labor/capital shares side of the profit rate issue (for political impact you might include the labor productivity increase being lower that the real wage increase). BUT I have been trying to point out that it does leaves out the capital side of the issue (were there any increases in capital productivity, capital price effects, etc?) - and this costs you politically (and at key moments can get things wrong). What do you lose, politically, by using ONLY the kind of argument you have laid out - which is more conventional, and hence, for now, more accessible and acceptable? Let me try it again, starting with Wolff's presentation (which might be a bit closer to you). You do lose LOTS politically in the terms of the contrast Wolff gives between the current era and the post-WWII era. The two eras differ not just just the contrast in fairness (a big enough issue) but the contrast in terms of actual increases in the productivity of capital. Wolff shows the Reagan-Clinton era as not just treating the average person badly, but for no real *sustainable* gain in the underlying engine of growth. When the IMF types call for temporary austerity in the name of future growth (as they will), with the Classical/Marxist numbers on the capital side one readily has the answer: this sacrifice is being frittered away in the current economic regime. In contrast, using just the conventional type numbers the Clinton people can claim that the process you describe was worth it because it led to sustainable growth (or at least was separate from that growth), and was just an income distribution problem that is now correctable. What do you lose intellectually that could lead to a wrong analysis that would have strategic political implications? Let's start with Dumenil Levy's numbers which mitigate *a little* the picture painted by Wolff. In their RRPE article they show *a bit* of an increase in capital productivity (don't get too excited, Clinton-istas). In a presentation last week at the New School [I'll try to post on this separately] Dumenil was overall pessimistic in his prognosis (for other reasons not relevant here) but emphasized in his conclusions that this mini-trend might be a loophole for the U.S. economy. Other people in the Classical/Marxist tradition (I believe Shaikh, but we will see when his book comes out) have felt yet more strongly about the possibilities of a coming upturn and feel this helps explain some of the current buoyancy. The point is one can't say that there will NEVER be a case of labor restraint contributing to accumulation (e.g. post war Japan) although the cases may be rare. It is very difficult to catch turning points and one has to avoid cry wolf - but this requires having the numbers calculated in a way that exposes these trends and counter-trends. The short-run Keynesian\Kaleckian issues are important. The long-run Classical\Marxist ones are too, especially at moments of changes in 'regime' - when long standing constants change. The point is not that one side is deeper. Life is both short and long run. They interact in some ways that contradict each other (a wage increase raises aggregate demand and so could raise profits, but the wage increase also raises costs and could lower profits) and some ways that reinforce each other. While the conventional categories sort of give you the Keynesian picture (Jim rightly corrected me when I slurred them as neo-classical), for now you have to go digging to get the Classical picture. But I think you will find it worth doing. Paul
Re: Estimating the surplus\Doug's question
Paul wrote: The two eras differ not just just the contrast in fairness (a big enough issue) but the contrast in terms of actual increases in the productivity of capital. Wolff shows the Reagan-Clinton era as not just treating the average person badly, but for no real *sustainable* gain in the underlying engine of growth. For what it's worth, the official BLS stats for the output per unit of capital (from the multifactor productivity series), average annual growth rate by period, for all nonfarm business and manufacturing alone: all nonfarm biz mfg 1950-73 +0.1% -0.3% 1973-94 -1.0% -0.9% 1994-2000/1 -1.2% +0.2%
Re: Estimating the surplus\Doug's question
Paul wrote: OK, I'll try, but please excuse the simplicity given the need for brevity. 1) Howard Dean announces that if elected he will exactly reproduce the Clinton era policies [never mind that he can't] but will re-distribute the growth back to working people WHILE achieving the same level of accumulation. 2) There is nothing in the numbers as categorized conventionally that immediately says this can't be done. Indeed, many post-Keynesians, using the conventional numbers, will say it can be done. 3) But Ed Wolff, using the numbers as compiled in his article about which I posted, says: [of course he actually doesn't, but I think this is faithful to the spirit of his article] No way. My numbers show that ALL of the profit rise, and hence the vast part of the capital accumulation (a little fudge on my part), was due precisely in the shift in shares from labor to capital. Reverse that and you have nothing. Without his numbers he can not claim to know that. I'd make the same argument using the real wage and the wage and profit shares of national income plus an analysis of the balance of class power. I saw that the profit rate, by my vulgar measure, fell during the 1970s and rose during the 1980s and 1990s. What happened? Unions were broken, the welfare state pared back, and a deep recession from 1980-82 scared the hell out of the working class. The profit rate fell sharply from 1997-2001 because labor markets were tight; Alan Greenspan was channelling Kalecki, saying that the pool of available workers was running dry, invoking the threat of wage inflation. As you say, tranlating the bourgeois stats into Marxian categories takes lots of work; why spend all that time crunching numbers when you could better spend it by thinking politically? Doug
Re: Estimating the surplus\Doug's question
As you say, tranlating the bourgeois stats into Marxian categories takes lots of work; why spend all that time crunching numbers when you could better spend it by thinking politically? I really do think it's important that some people do crunch the numbers, since, to get an objective picture, it's necessary to do that. It's just that it's useful if research agenda's can cohere with socialist political policy, even if only paraconsistently. It's not an easy topic to discuss, since the autonomy of scientific research must be respected and defended against sectional interests and corrupt people, but, it's best if the research is relevant to the concerns of the constituency of the socialists. I.e., the research provides means for more objective evaluation of political policy. I think a useful question to discuss is, what are the most important imperatives of the US Left at the present time ?, but whether other people think so, I don't know. It's just that if you can have basic agreement about that, then you can orient research better. In my experience, in the New Zealand Left, I found that lots of people had lots of answers, but they didn't know what the questions were, or what the priorities were, why focus on this or that theme. My basic philosophy is that there's never a shortage of solutions, it's more a question of prioritising and organising those solutions. I've been a bit chaotic in my personal life, I have my own personal conundrums, but that's my opinion, for what it is worth. J.
Re: Estimating the surplus\Doug's question
Doug writes: ...I'm talking about things like NIPA profit measures. Why is it so important to translate those into allegedly Marxian categories. Every quarter when the flow of funds numbers come out, I divide NIPA profits by the FoF measure of the capital stock and get a profit rate for nonfinancial corps. Well, you just DID translate these into Classical and Marxian categories. Are you speaking prose and don't even know it ? (naw, we know you know this stuff). Of course if you are writing for an academic audience things tend to get to more refined. For example (and as I know you know very well) the profit numbers can include/exclude things that do genuinely need adjustment (the amount a self-employed person makes that is really in lieu of their own salary; a non-corporate landlord's rental income on residential housing, but not the NIPA's imputed rental income on owner-occupied housing). Similar adjustments are needed on the definition of capital (lots). Is it so important to make these adjustments - and how far should we go? Maybe it depends on the audience and purpose. In some contexts, such as trying to convince people steeped in other traditions to at least look at these other categories in more detail, I would be perfectly happy with the way you do it. But sometimes, particularly for research, the more extended recalculation is worth it - if only to rule out the adjustments as affecting the conclusions. I also think sometimes it is worth the level of detail as a reference and so we keep a clear idea of the definitions for when they are used in other contexts not involving the macroeconomy (and someday we will be in a position to change the way these categories are calculated!). To me the problem is not so much that there is too much effort at the obscure academic end (and it seems that for the last 6 years there are only 2 small papers existent that update the Marxist/Classical data ! so how much are we talking about?). Rather, there is practically nothing written that translates this work into applied political material for a more mass audience or to policy analysis (there is the fine chapter on finance in After the New Economy but that's a different context). Without this applied work relating to creating a mass movement and social change, the authors and readers have to use their imagination and vision to evaluate the usefulness of particular research points as IF they were to be then picked up in a mass or applied context. It tells me that profitability peaked in 1966, fell into 1982, rose into 1997, fell into 2001, and has since recovered. What does all the translation mumbo jumbo add to this analysis? If it's that too much K is tied up in unproductive pursuits, why the recovery from 1982-97? Ahhh. So what you really object to is not translating NIPA to Marxian, but the productive\unproductive work. Why didn't you say so? ;- ) Well, you heard Jim's pov on this. It is a very particular subset of Marxian work and does require an awful lot of work. 2) BUT to be a mechanic you need to know what's under the hood. e.g. is the profit rate rising because labor has been squeezed or because of something going on in the physical capital (see #3)? A marxist will measure the labor squeeze in terms of 'surplus value' but any other measure would do (up to this point only!) And, say, unit labor costs and other conventional measures can't tell you this? What is the productivity revolution but a rise in the rate of exploitation? A fall in the unit labor costs doesn't tell whether it was due to a merely lowering the wage or something that happened on the capital productivity side. Two very different social phenomena, no? . One CAN string along a series of short period analysis and for a while it is a practical solution for short term policy proposals (some Keynsians, like Paul Davidson, would say forever). But when deep fundamentals change ... aren't YOU going to want these recalculations? Gimme an example of what's changed - one that I couldn't come up with using conventional economic stats. Doug OK, I'll try, but please excuse the simplicity given the need for brevity. 1) Howard Dean announces that if elected he will exactly reproduce the Clinton era policies [never mind that he can't] but will re-distribute the growth back to working people WHILE achieving the same level of accumulation. 2) There is nothing in the numbers as categorized conventionally that immediately says this can't be done. Indeed, many post-Keynesians, using the conventional numbers, will say it can be done. 3) But Ed Wolff, using the numbers as compiled in his article about which I posted, says: [of course he actually doesn't, but I think this is faithful to the spirit of his article] No way. My numbers show that ALL of the profit rise, and hence the vast part of the capital accumulation (a little fudge on my part), was due precisely in the shift in shares from labor to capital.
Re: Estimating the surplus\Doug's question
Its not just Marxist but a Marxist Classical concept: investment drives the economy; expectation of future profit drives investment; current profit rates *help* drive those expectations (all this in the 'long run'). Hence the big focus on profit rates. You are partly correct I think, but partly not. (1) For Karl Marx, the rate of profit (RP) is not just a jerk-off; and it is meaningless to talk about it without the mass/volume of profit (MP) (2) the economic significance of RP MP cannot be seen separately from the rate of reinvestment of realised surplus-value (the rate of accumulation) by type of activity, the turnover-time of capital, and the behaviour of a monetary currency (3) for Marx. private profit income is an appropriation which represents a fraction of the social surplus product - it is a yield on capital ownership, and the ownership of money capital, beyond social reserves, constitutes a claim on the social surplus product. (4) Consequently, in Marxian theory, profit constitutes the income of the bourgeoisie as a social class, apart from interest rent, and not just an accumulation/investment fund. (5) How exactly you measure the yield on capital invested may have an apologetic or justificatory function which prevents the real economic relationship from being understood. 2) BUT to be a mechanic you need to know what's under the hood. e.g. is the profit rate rising because labor has been squeezed or because of something going on in the physical capital (see #3)? A marxist will measure the labor squeeze in terms of 'surplus value' but any other measure would do (up to this point only!) I agree you need to know what is under the hood, but not all measures will do, because not all measures describe the same relation, and obviously if, say, you are a trade unionist, then it makes a big difference whether the drop in income is 5% or 10%. Some sociologist might say well it just fell but for workers the quantitative importance is significant. The structure of Marx's Capital involves a recategorisation of already existing ideas and theories in order to describe reality more accurately in a way that explanatory and predictive conclusions can be drawn from that. To me, there is data - calculated and categorized in accordance different frameworks, more or less. Or, I go pomo: There is no data in the world.] Agreed. Pomo is essentially arbitrary, jism as theory. But it is absolutely not true that bourgeois economics cannot admit class conflict and so on, and describe it in some way. Point is rather, the ruling class description performs an apologetic, justificatory function aimed at reconciling social classes, so that efficient exploitation by the ruling class can continue or recommence. In unfair distribution of wealth, we talk about fair production of wealth, and in unfair production of wealth we talk about fair distribution of wealth, in such as way, that the foundations of class power are never threatened. If we talk about specifically bourgeois categorisations, this is not just a short-hand, but refers to the fact that in the real world, the way in which a category or concept is formulated, can mean the difference between 50 dollars and 50 million dollars, or the difference between life and death. A gentleman of distinction is thus able to distinguish appropriately between different phenomena, reaping wealth, avoiding the loss of capital or his life. This is incidentally not a joke, because I have helped design government questionnaire surveys professionally, and by just asking a couple of badly formulated questions of an enterprise, I could affect the Balance of Payments negatively or positively by $600-800 million dollars Jurriaan
Re: Estimating the surplus\Doug's question
Paul writes: 1) Its not just Marxist but a Marxist Classical concept: investment drives the economy; expectation of future profit drives investment; current profit rates *help* drive those expectations (all this in the 'long run'). Hence the big focus on profit rates. Marx didn't emphasize the role of expectations. That's a helpful addition that came from the Keynesians. One example is Robinson. Bourgeois categories (as you put it) just don't have the same role for profit (to be picky, they haven't got profit at all in the 'perfect market' model). Depending on the flavor of neoclassical economics the long run is driven by (disembodied) technical change/population growth and blah blah. The NC folks also emphasize saving over investment (ignoring Keynes or assuming full employment). The Marxian view of economic growth as a disequilibrium process centered on accumulation and the rate of profit is much better. 2) BUT to be a mechanic you need to know what's under the hood. e.g. is the profit rate rising because labor has been squeezed or because of something going on in the physical capital (see #3)? A marxist will measure the labor squeeze in terms of 'surplus value' but any other measure would do (up to this point only!) right. [digression: Tonak's point was that the other authors were measuring something totally different called 'surplus' which Tonak/Shaikh say is a non-marxist concept, closer maybe to some Ricardian traditions, and a normative, subjective concept about what it should *really* take to produce something. It was this type of calculation that I was asking Tonak about.] The big difference is that for Tonak, Shaikh, and a lot of others, unproductive expenditure (U) should be counted as part of surplus-value, so that the numerator of the rate of profit is S+U, where S is surplus-value net of U. To Mage, as noted in a separate missive, the numerator is S, with U counted as part of constant capital (C). To yet others, the numerator is S, with U counted as equivalent to V, the wages/salaries of productive labor-power. So far this is still big tent: Classicals and Marxists together need to recalculate the standard format of the data. Neo-Classicals don't think in terms of labor-capital tradeoffs and don't seek to separate the components of the profit rate into labor vs capital and since N.C.s predominate the NIPA doesn't calculate in ways others can use. So one has to recalculate and re-categorize the date. No data should be taken for granted and used uncritically, but if you follow either the U is part of C view or the U is like V view, the difference with the bourgeois accounts is pretty minor in practice. (BTW, the national accounts for the US are more Keynesian than neoclassical, though there's a lot of overlap.) ... [BTW, does anyone know if any serious Marxist EVER did say OCC = FROP = system collapses or was that just a straw man we were taught? Was it always clear that FROP was a tendency that weighs upon other, upward, pushes going on at the same time leading to a dynamic system in struggle? In any event, the point is that again one wants to measure both the tendency and the counter flows to see how the ebb and flow is going and conventional NIPA can't do it.] I once read an article by Cogoy or Yaffe (or both?) that had a OCC == FROP == collapse scenario. It doesn't make sense. Capitalism will never permanently collapse until there's an alternative mode of production to replace it. JD
Re: Estimating the surplus\Doug's question
Paul wrote: 1) Its not just Marxist but a Marxist Classical concept: investment drives the economy; expectation of future profit drives investment; current profit rates *help* drive those expectations (all this in the 'long run'). Hence the big focus on profit rates. Fine with me (and Keynes too, though as Jim D pointed out, expectations was his innovation - too subjective for a lot of orthodox Marxists, I'd guess). Bourgeois categories (as you put it) just don't have the same role for profit (to be picky, they haven't got profit at all in the 'perfect market' model). Depending on the flavor of neoclassical economics the long run is driven by (disembodied) technical change/population growth and blah blah. I'm not talking about that. I'm talking about things like NIPA profit measures. Why is it so important to translate those into allegedly Marxian categories. Every quarter when the flow of funds numbers come out, I divide NIPA profits by the FoF measure of the capital stock and get a profit rate for nonfinancial corps. It tells me that profitability peaked in 1966, fell into 1982, rose into 1997, fell into 2001, and has since recovered. What does all the translation mumbo jumbo add to this analysis? If it's that too much K is tied up in unproductive pursuits, why the recovery from 1982-97? It doesn't inspire confidence that every Marxist who does the translation comes up with different results. 2) BUT to be a mechanic you need to know what's under the hood. e.g. is the profit rate rising because labor has been squeezed or because of something going on in the physical capital (see #3)? A marxist will measure the labor squeeze in terms of 'surplus value' but any other measure would do (up to this point only!) And, say, unit labor costs and other conventional measures can't tell you this? What is the productivity revolution but a rise in the rate of exploitation? So far this is still big tent: Classicals and Marxists together need to recalculate the standard format of the data. Neo-Classicals don't think in terms of labor-capital tradeoffs and don't seek to separate the components of the profit rate into labor vs capital and since N.C.s predominate the NIPA doesn't calculate in ways others can use. So one has to recalculate and re-categorize the date. [I won't touch the 'bourgeois data' reference. To me, there is data - calculated and categorized in accordance different frameworks, more or less. Or, I go pomo: There is no data in the world.] Is that pomo? Data and information are human inventions - they don't exist outside our social heads. 3) But then you want to figure out what exactly is going on in the capital side of the equation. So you have to breakdown price effects, productivity (technological improvement), and the simple arithmetical lowering you get by just adding more of the same capital without technological improvement (the OCC issue). Some (neo-marxists?), like the Wolfe article I posted, don't see much in the OCC. But they still need to recalculate the NIPA data to get at all these other issues. Again, what does this kind of analysis really tell you? One CAN string along a series of short period analysis and for a while it is a practical solution for short term policy proposals (some Keynsians, like Paul Davidson, would say forever). But when deep fundamentals change ... aren't YOU going to want these recalculations? Gimme an example of what's changed - one that I couldn't come up with using conventional economic stats. Doug
Re: Estimating the surplus\Doug's question
Moseley re-cast the data into authentic Marxian categories. I agree with Doug. I also agree with G. Lukacs -- Orthodox Marxism, therefore, does not imply the uncritical acceptance of the results of Marx's investigations. It is not the 'belief' in this or that thesis, nor the exegesis of a 'sacred' book. On the contrary, orthodoxy refers exclusively to method. Talk about Procrustes trying to put his guest to bed! The world has changed since 1867, and Marx's categories were never perfect to begin with. What, for instance, is unproductive labor? All labor is service-provision, whether it be bending metal into shapes, or putting food in a bag and handing it to somebody. Both are productive work, both alter the world to make it more favorable to a human being. As to finance, insurance, and real estate, some percentage of what happens there is legit service-provision, is it not? Same for management. Much of managers' salaries are disguised property income (part of the surplus), but some part is pay for work. As to the size of the surplus being a useful tool for thinking about socialism -- yes, very true. Nevertheless, doesn't the size of the surplus under socialism depend on both democratic decisions that have yet to even be formulated, as well as on the degree of economic shrinkage we experience when we start to replace corporate dominance? There is undoubtedly a gigantic amount of surplus wealth we are now producing. How much we can and want to produce under economic democracy -- who knows? If you add together profits, rental income, interest income, depreciation allowances, and, say, half of corporate officer compensation, straight out of NIPA tables, doesn't that give you a pretty clear picture of exploitation? Why translate this information into terms nobody but us can fathom?
Re: Estimating the surplus\Doug's question
Michael Dawson wrote: If you add together profits, rental income, interest income, depreciation allowances, and, say, half of corporate officer compensation, straight out of NIPA tables, doesn't that give you a pretty clear picture of exploitation? Why translate this information into terms nobody but us can fathom? Because it makes you think you're getting to a level of truth deeper than vulgar categories allow, even if no one can convincingly explain what that payoff from that increased depth is? Doug
Re: Estimating the surplus\Doug's question
Moseley re-cast the data into authentic Marxian categories. Michael Dawson writes: I agree with Doug. I also agree with G. Lukacs -- Orthodox Marxism, therefore, does not imply the uncritical acceptance of the results of Marx's investigations. It is not the 'belief' in this or that thesis, nor the exegesis of a 'sacred' book. On the contrary, orthodoxy refers exclusively to method. I'd agree with that, but a lot of Marx's method is reflected in his substantive conclusions, so we can't make a hard-and-fast separation here. Form and content are not totally distinct. Talk about Procrustes trying to put his guest to bed! The world has changed since 1867, and Marx's categories were never perfect to begin with. What, for instance, is unproductive labor? All labor is service-provision, whether it be bending metal into shapes, or putting food in a bag and handing it to somebody. Both are productive work, both alter the world to make it more favorable to a human being. It was Smith, not Marx, who saw service labor as unproductive. Marx's productive labor simply was productive of surplus-value, so that services could be productive. Marx's unproductive labor is involved in the circulation of commodities (rather than their production) or in supervisory roles in production. I find it relatively easy to define this, as people like Tonak Shaikh do. The question is whether Marx's concept is _useful_ for understanding the world. I'm not convinced that it is. My presumption is that it isn't. One problem is that unproductive labor can be indirectly productive (Jim O'Connor's term), which fuzzes up the concept, suggesting that different types of labor-power have different _degrees_ of productivity (direct and indirect). As to finance, insurance, and real estate [FIRE], some percentage of what happens there is legit service-provision, is it not? Same for management. Much of managers' salaries are disguised property income (part of the surplus), but some part is pay for work. Converting a theoretical concept into an empirical one is always difficult, no matter the flavor of economics you're practicing. (Neoclassicals have the same problem, though Marxists are more likely to admit to it.) You try to do as well as you can. Further, though the FIRE sector undoubtedly includes some productive activity, a relative increase in the FIRE sector is _prima facie_ evidence of an increasing role for unproductive expenditure. That is, FIRE spending is a proxy for one kind of unproductive expenditure. Doug H. has used it in this way in his empirics. As to the size of the surplus being a useful tool for thinking about socialism -- yes, very true. Nevertheless, doesn't the size of the surplus under socialism depend on both democratic decisions that have yet to even be formulated, as well as on the degree of economic shrinkage we experience when we start to replace corporate dominance? There is undoubtedly a gigantic amount of surplus wealth we are now producing. How much we can and want to produce under economic democracy -- who knows? the planning version of the surplus (including unproductive expenditure) is extremely problematical. As I've noted, it comes from Baran, not Marx. (Actually, something similar can be seen in Thomas More's UTOPIA and Edward Bellamy's LOOKING BACKWARD. Both, BTW, are very interesting.) If you add together profits, rental income, interest income, depreciation allowances, and, say, half of corporate officer compensation, straight out of NIPA tables, doesn't that give you a pretty clear picture of exploitation? Why translate this information into terms nobody but us can fathom? On a theoretical level, surplus value (a term that nobody but us can fathom) is part of a theory that gives a greater understanding than say, neoclassical economics or empiricism. The point is to separate it from versions that obfuscate (such as those that include unproductive expenditure as part of S) and to explain to those other folks what we're talking about. Surplus value can be easily explained as property income. I think it's a mistake to avoid difficult language (such as surplus value) just because people don't understand it. Difficult language will continue to be used (words like democracy, freedom, and justice) whether we like it or not. Dropping our hard concepts simply means that hard concepts from other brands of political economy (e.g., opportunity cost, factors of production, pure competition, human capital) dominate. to Michaels' questions above, Doug answers: Because it makes you think you're getting to a level of truth deeper than vulgar categories allow, even if no one can convincingly explain what that payoff from that increased depth is? The idea that there's a level of truth deeper than vulgar categories says (in modern social-scientific terms) that we need to have some sort of theory about how
Re: Estimating the surplus\Doug's question
Sorry, Doug, but too many conversations are going on at the same time on this. I think Tonak was making a different point. But, here's my foolish quick late night try (foolish since this is stuff you know well and I am just I taking the bait to find out to which element of these breakdowns you SPECIFICALLY object). No doubt to the amusement of the list at my expense :)- 1) Its not just Marxist but a Marxist Classical concept: investment drives the economy; expectation of future profit drives investment; current profit rates *help* drive those expectations (all this in the 'long run'). Hence the big focus on profit rates. Bourgeois categories (as you put it) just don't have the same role for profit (to be picky, they haven't got profit at all in the 'perfect market' model). Depending on the flavor of neoclassical economics the long run is driven by (disembodied) technical change/population growth and blah blah. 2) BUT to be a mechanic you need to know what's under the hood. e.g. is the profit rate rising because labor has been squeezed or because of something going on in the physical capital (see #3)? A marxist will measure the labor squeeze in terms of 'surplus value' but any other measure would do (up to this point only!) [digression: Tonak's point was that the other authors were measuring something totally different called 'surplus' which Tonak/Shaikh say is a non-marxist concept, closer maybe to some Ricardian traditions, and a normative, subjective concept about what it should *really* take to produce something. It was this type of calculation that I was asking Tonak about.] So far this is still big tent: Classicals and Marxists together need to recalculate the standard format of the data. Neo-Classicals don't think in terms of labor-capital tradeoffs and don't seek to separate the components of the profit rate into labor vs capital and since N.C.s predominate the NIPA doesn't calculate in ways others can use. So one has to recalculate and re-categorize the date. [I won't touch the 'bourgeois data' reference. To me, there is data - calculated and categorized in accordance different frameworks, more or less. Or, I go pomo: There is no data in the world.] 3) But then you want to figure out what exactly is going on in the capital side of the equation. So you have to breakdown price effects, productivity (technological improvement), and the simple arithmetical lowering you get by just adding more of the same capital without technological improvement (the OCC issue). Some (neo-marxists?), like the Wolfe article I posted, don't see much in the OCC. But they still need to recalculate the NIPA data to get at all these other issues. [BTW, does anyone know if any serious Marxist EVER did say OCC = FROP = system collapses or was that just a straw man we were taught? Was it always clear that FROP was a tendency that weighs upon other, upward, pushes going on at the same time leading to a dynamic system in struggle? In any event, the point is that again one wants to measure both the tendency and the counter flows to see how the ebb and flow is going and conventional NIPA can't do it.] 4) All of this is for long period analysis. For short period analysis I think most Marxists and Classicals I would be satisfied with *some* version of 'pure' Keyensian (not neo-classical/Keynsian analysis). For this type of analysis the conventional NIPA data works, more or less (even neo-classicals do some customizing though). Am I right that, so far, you have tended to do more of the short period analysis (and damn well) and so maybe haven't felt the need to recalculate the NIPA categories? One CAN string along a series of short period analysis and for a while it is a practical solution for short term policy proposals (some Keynsians, like Paul Davidson, would say forever). But when deep fundamentals change ... aren't YOU going to want these recalculations? Paul At 04:14 PM 12/4/2003 -0500, you wrote: E. Ahmet Tonak wrote: Assuming that we're still interested in changing capitalism, I am. I would argue that Marx's categories help us to understand how the imperatives of profitability and capitalist growth operate, in theory and in practice. That is sufficiently large enough payoff (intellectual or otherwise) for me. As I've said before, and never been convinced to the contrary, I don't see how the intelligent use of bourgeois stats and categories doesn't accomplish the same task. Unless you're trying to make the argument that rising OCC = FROP = system collapses as profits go to 0. But no one makes that anymore, right? Doug
