Just as Brenner does not think real wage gains were of sufficient magnitude to have explained the severity of the post 65 profit fall, I don't think the assault on labor in itself or even the Plaza dollar devaluation explain the recovery of the US profit rate--such as it has been.
I think Brenner and you are correct that the elimination of *industry specific* excess capacity was crucial in the improvement of US profitability. I think Moseley, Shaikh and others put all the emphasis on an increasing rate of exploitation as an explanation for the recovery of US profitability. This is doubtless true at the level of the system as a whole; world market crises can only be overcome by the production of additional surplus value. But within the US other factors were at work.
Here are some notes of my talk that I didn't get to; pretty much they already appeared on LBO: _____________________________
Yet Brenner only employs statisical measures that will confirm his ideal economic vision of hegemonic decline of nations. He compares nation states, ignoring that loss in export share can be compensated for sales by subsidiaries abroad. He fails to disaggregate the industrial structure. But the picture of relative decline is not so clear once we employ a simple disaggregation of US industries and then attempt analysis even within Brenner's own framework. Note that Brenner is not terribly clear to specify whether the excess capacity exists in all the hegemon's industries uniformly top heavy with old vintage plant or is rather industry specific for hegemons. If the latter, then the hegemon could suffer from excess capacity in some industries and be intl competitive in others.
But this would require a disaggregation of industries which Brenner does do in his historical account of the high technology industrial transformation of Japan but never mentions this in his discussion of the US since his vision of economic evolution requires the hegemon to suffer relative decline across the board. Indeed Brenner suggests that the US resurgence was based on the dual foundation of dollar devaluation and cheap labor. yet following James Galbraith, the most intl competitive industries tend to be highest paying, and no industry has recovered international competitiveness on the basis of low wages. Rather what is crucial for US profitability is achievement of monopolies over advanced means of production that have the only scarcity value on the world market (Galbraith).
It becomes possible to argue that the high dollar between 81-86 induced the scrapping of 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 nvestment demand. The narrative beomes one less of relative decline across the abroad than structural transformation under the pressure of international trade.
Indeed the restoration of profitability coupled with 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, preparing the way for the recovery in profitability. This structural transformation, central to Galbraith's vision of the US economy, is more important to understand than the simple of assessment of relative costs across countries as if structure never changed.
Andrew Warner illuminates this structural transformation of the industrial stucture as well as why the determinants of its growth also evolve from consumption to investment demand why the value of the dollar becomes less crucial in the stimulation of exports. The demand for investment goods is less price elastic, ceteris paribus, suggesting that Brenner has possibly exaggerated the role of the depreciated dollar in the US export surge, post 1985. Warner writes:
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."
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 mfgs to enjoy an export push while the US continued to run a deficit in low tech mfgs (see Andrew Warner, AER, 12/1994).
Yet as US manfacturers come to compete less with the final output from low cost capacity in consumer good production and to actually supply the advanced goods to build that low cost capacity, that build up that may have once raised the specter of continued overinvestment now augurs well for the prospects of US exports. 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. The dollar devaluation may indeed have helped these American based firms that were not already wiped out by the high dollar, though since the dollar did not lose value greatly vis a vis third world currencies, Southern exports, often from US plants abroad, have posed a threat all along to actually competing industries based in the North
But as sophisticated capital goods come to dominate exports from the US , what determines export strength is not so much the magnitude of international competition but the strength of international investment in the US, Europe and Asia. The present weakness in world investment demand, now moving to Europe, 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 will not be able to explain the eventual build up of excess capacity in the capital goods-heavy, US mfg sector. That overcapacity will be the result not of international competition but further precipituous declines in international investment rates that will give rise to the international competition that Brenner invokes to explain excess capacity. For this reason easy *demand* Keynesian policies on a global scale--the watchword of the social democratic left--may provide little relief to the US mfgs as the world depression unfolds even if debt to GDP ratios were not to resume their upward hike in such conditions, thus furthering constraining the use of the fiscal card.
yours, rakesh