profit rate falling!

Rakesh Bhandari bhandari at phoenix.Princeton.EDU
Thu Mar 25 20:21:42 PST 1999


In The Golden Age Illusion, Webber and Rigby argue that quicker turnover has been a main impetus for the recovery of profitability. They seem to be referring to the quicker turnover of circulating capital; but a slower turnover of fixed capital could boost profitability too--a possibility they don't seem to have considered in this rather massive study in which advanced econometric methods are deployed.

On this list, we are not even sure how in the face of changing tax structures, interest rates and accounting "innovations" to measure the profit rate in the first place, much less the actual Marxian equations of surplus value as determined by the OCC, the rate exploitation and the turnover of (circulating) capital.

At any rate Webber and Rigby argue:

"The final control over the rate of profit is the time required to run capital over--the time between the advance of money for production and its return after commodities have been sold...The turnover time of capital varies markedly between the 4 countries (Australia, Canada, Japan, USA). Capital turnover about 13 times a year in Japan in 1990, about 6 times a year in North America, and ony about 5 times a year in Australia [I can't figure out how they came up with these fascinating numbers]....There is evidence that in all 4 countries the number of turnovers has increased particularly rapidly since the mid 1970s...These changes have offset any tendency of the rate of profit to fall, especially since the mid 1970s" p. 322

This strikes me as dubious since output growth rates should have been higher if turnover was increasing so sharply?

Yet to the extent circulation time constitutes de facto devalorisation of capita--another one of Marx's brilliant insights--profitability has been improved by better telecommunications allowing orders from and to producers to be executed more quickly and the arrangement of just in time orders of raw materials that don't thus build up as inventories or idle capital. These latter Japanese innovations of course have been a central feature of the reorganisation of production.

Harvey writes very insightfully about turnover; there are some very interesting pages in Peter Custers' Capital Accumulation and Women's Labour in Asian Economies.

yours, rakesh



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