> From: Doug Henwood <dhenwood at panix.com>
> Patrick Bond wrote:
> >As overaccumulation begins to set in, as structural
> >bottlenecks emerge, and as profit rates fall in the
> >productive sectors of an economy, capitalists begin to
> >shift their investable funds out of reinvestment in
> >plant, equipment and labour power, and instead seek
> >refuge in financial assets.
> Hmm, two things. First, finance is also a way through which the big
> bourgies force profit-maximizing strategies on fat governments and lazy
> managers - bond-driven fiscal tightness and stock-driven wage-cutting.
Right, but we're distinguishing, I hope, between a "profit-maximizing strategy" and an accumulation process, right? The former a bank can do in the context of control over productive processes during a vicious round of devaluation; the latter the productive capitalists do with or without the support of banks. I don't want to claim a totally distinct set of fractions of capital since we all know about interpenetration and the Hilferding "finance capital" concept (as flawed as it is). But Doug you'd admit that there can well be a very different logic between financial-speculative K accumulation, and productive K accumulation, right?
> OECD figures show a very dramatic recovery in U.S. profitability, from a
> low of 17.2% in 1982 (still, the highest in the OECD except for Greece's
> 24.1%), to 28.8% in 1987 (ahead of Greece's 25.2%, and the highest in the
> OECD - though they warn that cross-national comparisons should be done with
> "great care." Europe and Asia may be in the early stages of similar
> reconstructions.
Profitability is one measure of accumulation, but does not take into account the variety of devaluations -- Northern worker wages, Southern and FSU/East bloc living standards, financial crashes, environmental degradation, etc -- that is occuring simultaneously, in order to either rid the system of overaccumulation (e.g., the huge productive capacity laid waste by technological change) or move the overaccumulation problem around through time and space (often through credit). In that sense if the rising profits are not underpinned by a virtuous set of consumption and production relationships -- what the regulation and SSA theorists always look for in their regimes of accumulation and modes of regulation -- then the rising profits are what Jim Devine has found in the late 1920s, i.e. a distraction from the underlying problems of overaccumulation that don't spell revival, but more trouble ahead.
> You do talk about the "control" functions of finance, but
> I think you underestimate how successful they've been so far.
How successful, Doug, if Soros and Camdessus have to keep the Chicken Little chatter up regularly to get the bailouts they need?
> But we've
> been over that before. I'd also say that it's not that K seeks refuge in
> financial assets - I'd say that since profits take money form, financial K
> is just all that un-reinvestable profit in its natural guise. And the
> financiers have been positively extracting cash from the firms they own.
Fair enough, but largely semantic. I also agree that too much can be made of the institutional form and that we have to watch the money, the circulation of K. A book that sets this up well is Kees van der Pijl's *Making of an Atlantic Ruling Class* (Verso 1984) which in an appendix measures the differential returns to money and productive capital and talks through these circuits very nicely in theoretical terms.
> The profit upturn over the last 15 years has been pretty impressive, and
> it's strong evidence that Anwar Shaikh is right about the U.S. being in an
> up K-wave. Of course, it'd be easier to believe that if the rest of the
> world were in better shape.
That's the nub. Global uneven development is a geographical representation of moving the crisis around without solving it.
> And if U.S. capital weren't in such a euphoric
> mood; earlier upwaves began with much more sober financial valuations.
> Though maybe the euro will force the needed wage and benefit cuts on the EU
> and restore profitability there - a dismal 11% average in 1982 up to only
> 15% today, half American rates, a comparison made with the recommended care.
Devaluation on the back of the European working class is probably not as easy as recolonising Africa, another strategy being pursued with great abandon and to some extent with SA's lubrication through a new free trade deal about to be announced. Again, probably not the basis for a reconstituted global regime of accumulation, at least while all that financial overhang sits threateningly like a pot belly atop the spindly legs of production.
> From: Carrol Cox <cbcox at rs6000.cmp.ilstu.edu>
> One point that (despite rather extensive reading
> on the subject) I'm still not wholly clear on, and we all need to have
> deeper and deeper knowledge of, is just how the fact of the continuation
> of the 1974 slump for 10s of millions of households is to be grasped
> analytically in its relationship to the long boom which has *also*
> developed since then.
Is it a long boom? Not from my standpoint in Africa, and not on the basis of all the comparative stats of how long booms get going. How to grasp this analytically? The theory of uneven development?
> From: Trond Andresen <t.andresen at uws.edu.au>
> >As overaccumulation begins to set in, as structural
> >bottlenecks emerge, and as profit rates fall in the
> >productive sectors of an economy, .....
> They fall because of debt service burdens
Trond, what about the old formula of rising organic composition of K leads to falling profits? Rising debt burdens (for firms, households and states) are one symptom of this. That would be the broad outline I would advance, based on intuition and a glance at the chronology of the 1960s-70s downswing in profits. Is there better evidence? Better theory?
> >....capitalists begin to
> >shift their investable funds out of reinvestment in
> >plant, equipment and labour power, and instead seek
> >refuge in financial assets. To fulfil their new role
> >as not only store of value but as investment outlet for
> >overaccumulated capital, those financial assets must
> >be increasingly capable of generating their own self-
> >expansion, ...
> >..etc.
> You seem to hold that long-wave cycles in capitalism are
> probably due to overaccumulation. If so, I
> agree. I have a paper which is accepted for publication that
> argues along the same lines. It is at
> http://www.itk.ntnu.no/ansatte/Andresen_Trond/dwnld/dyn-of-accum.pdf
Great, I've always liked your black hole theory. Will bring it down. Not too many funny equations?
> From: "David Lloyd-Jones" <dlj at pobox.com>
> > As overaccumulation begins to set in, as structural
> > bottlenecks emerge, and as profit rates fall in the
> > productive sectors of an economy, capitalists begin to
> > shift their investable funds out of reinvestment in
> > plant, equipment and labour power, and instead seek
> > refuge in financial assets.
> I don't get it. For "financial assets" to be a "refuge," money has to be
> squirrelled away in them, but this doesn't happen with money spent on
> stocks. For every buyer there's a seller. Every time somebody puts money
> into one of these "refuges" somebody else is taking the same amount out,
> either as a seller or as a broker. Net refuge: zero.
Financial assets can be a refuge in the sense of storing and increasing the mass of money value, on condition the "price" (if not the underlying value) increases. In that sense the speculative urge to get hold of financial assets, instead of reinvesting in productive assets (in an overaccumulated world) represents a refuge for K in general. Some early sellers miss out on the rising prices, but the system as a whole gets more biased towards financial profits.
> From: James Devine <jdevine at popmail.lmu.edu>
> I think that story makes sense for when the profit rate falls (as from the
> late 1960s in the US). But as Doug notes, it's currently rising (though
> methinks K-waves are BS).
As noted above, perhaps illusory when all other things -- the massive devalorisation processs underway elsewhere on earth -- are considered? I don't know, am just asking for gut impressions.
> I think the current Bull market is more similar
> to that of the 1920s, when the profit rate was rising, especially in the
> corporate sector.
Under conditions of intensifying uneven development due to financial ascendance and new technologies, there's no contradiction here with my argument.
> High profits allow high stock valuations. Also the strong
> profit flow allows corps to buy back their own stock (a current phenomenon,
> not seen much in the 1920s). Third, the rightward shift of the income
> distribution that accompanies the rising profit rate gives money to the
> classes most likely to speculate. Finally, the "nothing succeeds like
> success" attitude spawned by successful union-busting, wage-cutting, etc.,
> encourages the optimism that can be the basis for "irrational exuberance."
Good points. Nothing here suggests the basis for a new long-wave of K
accumulation. Lowering the standard of living of the global working
class and introducing flexibility do not, by themselves, constitute
the new relations of production required to get a new "regime" off
the ground. Do they?
>
> >To fulfil their new role
> >as not only store of value but as investment outlet for
> >overaccumulated capital, those financial assets must
> >be increasingly capable of generating their own self-
> >expansion, and also be protected (at least temporarily)
> >against devaluation in the form of both financial
> >crashes and inflation.
> Financial assets can't be "self-expansive" unless production is also
> profitable.
Maybe a semantic problem? They can be, temporarily, if there is a speculative cycle like the one we've seen since the mid 1980s. Production in some sectors is more profitable than the early 1980s, but in no way justifying the rise in P/E ratios.
> From: Mark Jones <Jones_M at netcomuk.co.uk>
> The problem I have with K-waves is that there is no more evidence that they
> exist than that you get showers in April.
There does seem to be enough evidence of pattern-like behaviour in the historical record. I agree that the K-wave is a distraction, but like many other heuristics (esp. the regulationists) it's what political economists like to use to quickly capture a phenomenon. I would prefer a phrase that embodies the valorisation and devalorisation associated with accumulation, plus the temporal, spatial and scalar displacement of overaccumulation, but aside from "accumulation process" there's not much shorthand available.
> I read Patrick's piece but I still
> don't believe in it. What's happening in the US is the flipside of what's not
> happening elsewhere and anyway is influenced, I think, by the ongoing rewards
> from winning the Cold War. Just where is the technology for a new K-upswing? The
> Net? Give me a break.
No disagreement. The "flipside" argument is the theory of combined and uneven development. I would only add that this theory becomes all the more important, the more financial activity transcends the logic of production. Unevenness is amplified. I've got that documented pretty well for Zimbabwe, if anyone is interested. The publisher is Africa World Press and they have a web site and Amazon is selling...
Thanks, that's more good discussion on these themes that I've had in a
year of seminars at Wits University and with comrades from our journal "debate". I'll share this correspondence with the comrades to give them a sense of the vulnerabilities in my interpretations. I'm sure there are lots more, which will be unveiled here in coming posts.
Yours,
Patrick