At the core of Brenner's theoretical model are the twin problems of insufficient scrapping and unplanned greenfield investments. Credit forestalls scrapping of high cost capacity in downturns; new international competitors nontheless introduce low cost capacity. Without that scrapping greenfield investments create too much capacity, leading to oversupply and therewith a price war that ensures a precipituous decline of profits (see Darity and Galbraith). Because downturns are not allowed to run their course, leading firms do not scrap their oldest capacity; there is thus no shortage of capacity to accomodate the new investments in low cost capacity by emerging nations. Drawing on lines of credit, the high cost capacity is able to remain in the market at the lower prices that are set by competitors in hopes of expanding their market share and the market generally so as to secure the necessary mass of surplus value to justify the large scale investments in low cost capacity; moreover, the competitors are willing to accept no more than prevailing average rate of profit on that investment in new large scale, low cost capacity exactly because of the greater mass of surplus value realizable therefrom.
However, due to this insufficient exit--the key to Brenner's theory--the competitors do not win the market share to have justified that large scale investment, leading them to retaliate with even lower prices that brings them under the previous average rate of profit and prevents the older firm from realizing the prevailing average rate of profit on their circulating costs. The average rate of profit has fallen.
The boom that could have resulted on the basis of the expansion of this new low cost capacity is thus undermined, and the economy enters a long down turn as it forgoes market expansion and surplus profit with which to finance rapid accumulation. Brenner's theory is a tale of insufficient exit and scrapping of unfit capacity, a sort of fallacy of sunk costs on a global scale; it's a tale about why death remains the most creative entity in the life of capitalist evolution, no less than biological evolution.
Brenner has located the problem of falling profitability in pricing behavior and exit strategy within the realm of competition, not from the progressive increase in the ratio of constant to variable capital within the hidden abode of production itself. The latter cannot decrease the profit rate no matter how much the capital/labor ratio may rise according to Brenner without the dubious "Malthusian" posit of declining capital productivity. For Brenner, the only way to derive a falling profit rate is through assumptions about the nature of conscious strategy in the realm of competition. Brenner is content to explain capitalist reality in terms of the conceptions and strategies--the consciousness, if you will--of the bourgeois agents trapped in competition. It now need only be shown that a profit rate decline cannot be so derived without unstated or abitrary assumptions on Brenner's part. More importantly, the whole burden of Marx's critique of the illusions of competition was to demonstate that a scientific analysis of falling profitability in particular was impossible if one was trapped on the surface like this (CapitalIII:330-32.Vintage).
rakesh