Looking at Economics, again
So I have written on the Declining Rate of Profits debates before, which has to be up there with base/superstructure analysis, the meaning of “dictatorship of the proletariat,” and what is meant by the labor theory of value is on the list of things that Marxist/Left economists never can seem to come to conclusions about in a consensus way. If anything these indicate the problems of reconciling Marx’s unfinished project, but I am digressing. So here are some issues to consider that complicate my view of Kliman. In the US, the rich ARE getting richer,
IN the eight decades before the recent recession, there was never a period when as much as 9 percent of American gross domestic product went to companies in the form of after-tax profits. Now the figure is over 10 percent.
During the same period, there never was a quarter when wage and salary income amounted to less than 45 percent of the economy. Now the figure is below 44 percent.
For companies, these are boom times. For workers, the opposite is true.
The government’s first estimate of corporate profits in the third quarter was released two days before Thanksgiving, at the same time it revised the rate of G.D.P. growth in the quarter down to an annual rate of 2.0 percent.
The report showed that effective tax rates, both corporate and personal, are well below where they were during most of the post-World War II era.
This is hard to reconcile with Kliman’s observations, or is it. As Michael Robert’s points out:
Suffice it to say, that I think Kliman is right about using historic costs, but that contrary to Kliman, it don’t think it makes much difference empirically. See this graphic for the US rate of profit (using the whole economy measure that I prefer) based on both current (replacement) and historic cost measures for fixed assets. The cyclical movements and underlying trends operate for both.
That is Husson’s argument too, but I don’t agree at all with Husson’s interpretation of the data that concludes that because the US rate of profit rose from 1982 onwards, this means that Marx’s law of profitability was irrelevant to the Great Recession. Husson reckons that as profitability rose, investment growth slowed because capitalists made profits not from the productive investment sectors, but from switching into unproductive sectors like property and credit – what Marx called fictitious capital. The crisis in neo-liberalism that culminated in the Great Recession was due to the collapse of this credit-based growth – what he calls ‘chaotic regulation’.
I argue in my papers that Marx’s law operates as the ultimate and underlying cause that breeds the proximate causes of the housing boom and slump, the credit bubble and the leveraging of debt that eventually led to the financial collapse. I note that Kliman in his new book, The failure of capitalist production (http://www.amazon.co.uk/Failure-Capitalist-Production-Underlying-Recession/dp/0745332390/ref=sr_1_1?ie=UTF8&qid=1321791323&sr=8-1) makes these same points (I’ll be reviewing Kliman’s book in a future post). But I back up this conclusion with empirical data that shows the US rate of profit peaked in 1997 at a level that has not been surpassed since, suggesting that Marx’s law started to operate inexorably on capitalist production and the countervailing factors to the falling rate of profit had weakened. Indeed, from early 2006, the mass of profit in the US began to decline, well before the financial collapse, again suggesting that this is a good forward indicator (and cause) of capitalist crisis.
As Kliman said in the session, if you think the causes of the Great Recession are to be found in the financial sector and in ‘uncontrolled credit’ (this seems to be the position of Dumenil and Levy – see my post, The crisis of neo-liberalism and Gerard Dumenil, 3 March 2011), then there is a solution based on regulation of the financial system and credit creation, which is short of a transformation of the capitalist mode of production. If you reckon the cause lies in the mode of production itself (i.e. the production of surplus value) and not in its distribution (credit, rent, interest), then you are saying that credit control and tight regulation of the banking sector will not be enough to stop boom and slump in capitalism.
In other words, the profits and the income increases may seen only tangentially related. Individual incomes are increasing because of politics, and changes in the political matter. So that’s a strike against hyper-economism of a narrow view in the base/superstructure argument, but the declining rate of profits may still hold even despite that. But as Robert’s also points out: this is not a world analysis. If capitalism is a non-ontologic historical totality, then the social relationships it describes are in the entirety of the world not just the US. So much more work needs to be done.