You know, after WII with effective demand provided by the govt and strong exports, many thought that the underconsumptionist explanation for the Great Depression was vindicated. Pasinetti argues that realization problems occur because as incomes rise, demand cannot be sustained for the old commodity mix (Engels law or some such thing), so there has to be innovation of new products and consumers have to be taught how to consume this ever greater variety of commodities if all the surplus value that can be produced is to be realized (all this raises question about that sanctum sanactorum of the neo classical citadel--the exogenity of consumer preferences). But that "learning" takes time, and there can be downturns in the interim, so the govt has to step in and sustain the economy before a new round of innovation in consumer goods has commenced. So the post keynesians make such innovation central to their theory. Just another angle on the innovation question.
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here is something I am working on. It's a reply to someone thinking about Brenner
Well, we need an explanation for this (partial) restoration of mfg profitability post 1985. As you quite astutely point out: " mfg profit rate has recovered strongly in the US from the mid-80s, a period marked by growing and persistent trade deficit in manufactures. So even if one looks at the aggregate mfg sector, Brenner's argument can not be sustained."
But... From within Brenner's framework, would it be possible to argue that the high dollar between 81-86 induced the scrapping of that low profitability excess capacity in lower tech mfgs which were still enjoying close to a balance in trade until 1981 and that this elimination of basically sick industries left the US with a more internationally competitive, albeit shrunken, mfg sector top heavy with high tech and more generally capital goods production dependent upon the strength of global investment demand. That is, the growing trade deficit would itself be the proof of Brenner's theory--that is, excess capacity in sick lines was previously depressing the profit rate and its elimination, though ballooning the trade deficit, cleaned the system out.
While low tech mfg went into a substantial deficit during the high dollar, high tech also lost its surplus but the balance of trade in high tech mfgs only went negative in one year 1986 (and this almost wholly due to the strength of Japanese exports, though it should not be forgotten that US companies did maintain their share of the world's high technology trade by increasing high tech exports from other nations--relying here on the discussion in Frederick Scherer, Intl Competition in High Technology). After 1986, the devaluation of the dollar, as well as an investment boom in Europe in preparation for the 1992 reforms as well as strong investment in Asia which compensated partially for the collapse in Latin America, enabled US capital good exporters to enjoy an export push while the US continued to run a deficit in low tech mfgs (see Andrew Warner, AER, 12/1994).
>Brenner's idea of international competition, or more precisely (given his
>short-run
>orientation), net foreign demand, driving US mfg profitability is dubious.
>First of
>all, in the period considered by him (1950-now), the most significant
>decline in
>mfg profit rate took place between 1950-58, not 1965-73 as he claims (-47% as
>compared to -40%). Now, this happened before the alleged onslaught of foregin
>competition began.
This is a most helpful formulation of Brenner's thesis and quite strong evidence against it. Now how does Brenner arrive at the idea that net foreign demand drives US mfg profitability?
It seems to me that having persuasively dismissed the wage squeeze theory and confronted with continued producivity growth, he infers that intl competition must be the culprit for the fall in profitability. He has eliminated everything else, but intl competition was not so strong to have undermined the balance in trade, which lasted until (?) 1975 or so. Perhaps he could argue that US mfgs defensively lowered prices in order to stave off imports so that the reduction in the nominal output capital ratio is proof of the power of intl competition. But this gets rather speculative, no?
The other argument for the culprit being intl competition is the absence of a severe decline in the nominal output capital ratio in the non tradeable sectors. This seems to me to be the evidence he is relying on the most? What do you think?
Nor do I see how a decline in the US share of world exports necessarily explains declining US profitability. Perhaps Japan and Germany were able to secure some measure of surplus profits if US mfgs as modal producers were establishing intl production prices, but why must that necessarily mean a decline in the US rate of profit? As long as the US mfgs were determining intl production prices, this should only mean surplus profits for Germany and Japan, not a falling profit rate for the US. Or it may only mean that the US profit rate would no longer continue to incline in accordance with productivity gains if Japan and Germany were shaving a bit off intl prices to win some greater share of a growing market. Still no explanation for the decline; only an explanation for a slow down in the rate of incline.
As Josh Mason argued on LBO talk, there are only problems if effective demand is not sufficient to absorb the entire commodity output, thereby creating excess capacity and inducing price wars. For Mason, lack of effective demand and excess capacity are two sides of the same coin. But that cut in effective demand would only materialize if there were a global slow down in the rate of accumulation, one of the major points of Marx's reproduction schemes being that categories of demand for investment and consumer goods are determined by the rate of accumulation itself (Mario Cogoy made this point in his criticism of Joan Robinson--I downloaded it for LBO). And how would that slow down be explained?
The slow down in the rate of accumulation has to be explained independently of the competition to which it gives rise. To return to Grossmann, I think this is what he would have emphasized.
I believe this is at the heart of Marx's methodological procedure--that is, why he constructs a value theoretic model in which he purposefully abstracts from nation states, various strata and classes and competition and refers to "no more than the production and acumulation of capital in an imaginary [or idealised] system in which total capital confronts the working class as a whole--thus it refers to the pure operation of the mechanism of surplus value production and the dynamics of the accumulation process. Marx's aim is to demonstrate the existence of a tendency, inherent in capitalist development and dominating it, by reference to which alone the real movement of capital can be explained. By this means he demonstrtes that all of the difficulties of capital arise from the nature of capital itself, from surplus value production and the development, governed by it, of the social productivity of labor on the basis of the capitalist mode of production." Mattick, Economic Crisis and Crisis Theory, p. 54-55
More specifically, Marx demonstrated that ever fewer workers must create an ever greater suplus value in order to produce the profits required by the capital already in existence if it to continue to expand. Inevitably a point will be reached at which the greatest quantity of surplus value that can possibly be extorted from the diminished working class is no longer sufficient to augment the value of the accumulated capital. This is how Marx explains the slow down in the rate of accumulation which slow down is the efficient cause of excess capacity and the competition to which it gives rise.