health care costs (was Soviet and US Economy)

JayHecht at JayHecht at
Wed Jul 22 19:53:41 PDT 1998

In a message dated 98-07-22 12:29:41 EDT, you write:


specifically, i have heard the concept of devaluing capital on this

list before. what does it mean? also, what is s.v. extraction?

>> Since I started this let me take a crack at it:

Marx locates a fundamental irrational logic in kist production: automation - in the form of ever-greater fixed capital - is necessary to do battle in the marketplace. However, capitalizing the labor process in machines, necessarily entails greater expenses that must be serviced, irrespective of current sales.

Railroads are highly capital intensive enterprises, with high fixed costs - to be profitable you want to run them 24/7 to minimize those fixed costs. If your in a rate war - always cutting prices to kill the next guy, you need "deep pockets" to operate at losses for a protracted period. The devaluation of capital occurs when a competitor goes bust - if you've got the resources you can get in at "fire sale" prices, but then you've got to get back in the game (automate - cut prices - gain market share - automate again - etc.)

Over the last twenty years, hospitals went on a building spree because capital reimbursement was always on a cost-plus basis. When the gov't switced from cost-plus to capitation, the hospitals got caught with a lot of empty beds and a ton of debt service (i.e. their capital stock was effectively devalued).

I hope this helps to clarify the "devaluation" of capital issue.


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