For Brenner, the American export push enabled by the La Plaza devaluation of the dollar was critical in enabling the US to shift the burden of the profitablity decline away from itself and onto Germany and Japan:
"What mattered most thought was the value of the currency. Between 1985 and 1990 and then between 1990 and 1995, the exchange value of the yen and the mark appreciated against the dollar at the extraordinary avergage annual rates of 10.5% and 12.7% respectively and then .1 % and 2.5 percent respectively..US exports grew very impressively, at their fastest rate during the postwar period, shooting up at an average rate of 10.6 per cent in the wake of the Plaza Accord between 1985 and 1990, and at an average annual rate of 7.4 percent between 1990 and 1995, compared to 2.1 % between 1979 and 1985, 5.8 % between 1973 and 19079, and 6.5 pcertent between 1950 and 1973...The Plaza Accord marked then a major watershed, the opening of a new ear in which, in relative terms, the fortunes of the manufacturing economy of the US would dramatically improve, while those of the [sic] Germany and Japan would deteriorate." (p.203)
However, Brenner's case for the importance of the devaluation in the explanation of a surge in US exports may not be sustainable. Drawing from Andrew Warner "Does World Investment Demand Determine US Exports" American Economic Review 12/1994, one finds
"Global trade stats typically show trade in capital goods and imtermediate goods is more important in world trade than trade in consumer goods. This pattern is especially true in the case of US exports, where capital goods and intermediates represent a substanital share of the level, growth, and variability of exports...Given the importance of capital goods in the growth and variability of US exports, it is natural to expect that investment demand in the rest of the world has been an important determinant of US exports...It means that investment determinants rahten than consumption determinants are at the root of export demand. it helps explain why exports are highly variable: because they are driven by a highly variable component of foreign demand...the evidence from the late 1980s suggests that, by ignoring the importance of global investment demand, traditional analysis overplayed the role of the depreciating dollar in accounting for strong exports.
"What happened essentially was that investment spending in Western Europe and Asia grew faster than GNP during this period (in Western Europe the investment boom was linked to anticipations of the new market after 1992), and traditional econometric equations that conditioned on GNP rather than investment had to place a high weight on the depreciating dollar to fit rapid export growth. In contrast, this paper finds that after controlling for global investment demand, the real dollar appears to be less important...the conventional GNP model would attribute 57 percent of the increase in exports to dollar depreciation and 33 percent to world GNP growth, while 10 percent would be left unexplained. In contrast, the investment model would attribute less of the increase to dollar depreciation (48 percent) and more to world investment demand (54 percent), leaving less unexplained (-2 percent). Hence, the conventional practice of using GNP in export regressions attributes too much of the recent export boom to the depreciating dollar and conceals the importance of global investment demand...
"[a]n important of the international transmission mechanism operates through the domestic capital goods industry. Data on the US industrial structure lend support to this view. Between 1967 and 1989, while the share of manufacturing output in total GDP declined from 27.5 percent to 19.1 percent , the share of capital goods production (excluding defense and autos) in total manufacturing rose from 28.3 percent to 38.0 percent. Over the same period, the share of the US capital goods production that was exported rose from 20 percent to 45 percent. Capital goods exports increased from only 1.37 percent of the GDP to 3.97 percent, an increase of a factor of 3. [Imports of capital goods have also grown during this period, but there was still a net increase in the share of GDP devoted to capital goods between 1967 and 1989]. Therefore, while the manufacturing sector has declined as a whole, there has also been an important shift toward capital goods production, driven in large part by growth in global investment demand...Growth in global investment demand in the late 80s was especially important in explaining the growth in exports during this period, and ignoring this phenomenon can lead analysts to exaggerate the role of the depreciating dollar."
What implications, if any, does this have for Brenner's analysis?
Well, first, Brenner's key claim is that international competition has prevented sufficient mark ups to maintain profitability despite rising real output-capital ratios. One would imagine that such price based competition hits most severely in the consumer goods sectors in the advanced capitalist countries, especially as several third world countries have entered the fray and deployed unequal wages even after controlling for productivity (see James Galbraith as well). The dollar devaluation may indeed have helped these American based firms subject to such competition.
Yet to the extent that the export surge did not greatly restore profitability (Brenner: 203-4), the effect of the devaluation may have been to support the continued overhang of excess capacity in the American consumer good industries that can no longer face intl competition.
But as sophisticated capital goods come to dominate US exports, what determines export growth or mfg profitability generally is not so much the magnitude of a currency devaluation or international competition respectively but first and foremost the strength of international investment in the US, Europe and Asia.
The present collapse in world investment demand is already fueling a burgeoning and near unsustainable US trade deficit as exports have fallen much more steeply than cheap imports have risen;
Yet without a theory of the dynamics and cycles of world investment demand, Brenner cannot explain the silent build up of excess capacity in the capital goods-heavy, US mfg sector.
That overcapacity will be the result not of international competition but a decline in global investment that will give rise to the international competition that Brenner invokes to explain excess capacity.
Of course at present that excess capacity is presently hidden and profits inflated by the strong effective demand within the US arising out of a stock market bubble which has led to
a. consumption binge that is now fueled by the sale of stock and borrowing against inflated portfolios b. govt spending made possible by the taxation of income that would have otherwise been saved after the sale of stock (see Louis Uchitelle yesterday in NYT)
Of course it is the collapse in world investment demand that itself explains the temporary formation of the US stock market bubble (the US absorbed 4x more capital in 1998 than 1994). As Grossmann explained long ago stock market booms always outlast the production boom because dividends are still being paid on the boom period; not only is this case, but when the production boom has passed its peak and the decline has begun, money not needed for the productive process is added to the volume of money already in use on the stock exchange, and being directed to make further profits, pushes up share prices still higher. The apex of the stock exchange boom is therefore reached later than the point at which the decline in actual production has begun. Greenspan's easy credits have not found their way into production as much as as speculation as money can only produce gains on the stock exchange.
Yours, R