>Actually, it's not merely "wasted" per se, it reflected a shift of
>investment trends towards fundamentally speculative -- not
>immediately (or even realistically medium-term) value-extractive --
>activities... simply because that's where short-term-oriented
>investors felt they could realise a higher capital gains (until
>March 2000 they were right).
Actually I don't know where the real investment went over the last few years. Do you?
>
>> Profits also rose - from around 7% of GDP in the early 1990s to 10%
>> at the end of the decade
>
>But a) can you disaggregate the alleged profitability upturn to take
>into account the problem of profits derived (even in
>"manufacturing firms" like Ford, GM, GE) from merely financial or
>otherwise non-value-productive activity;
The best info I've got is the "nonfinancial corporations" data from the national income accounts. GE would, of course, be classed as nonfinancial. But, and we've been through this before, a firm like Ford that finances purchases of its own vehicles is capturing profits its bankers would have gotten in another era, and financial profits are redistributions from profits of production, so you could still say that the overall rate of profitability of U.S. capital is substantially up over the last two decades.
> and b) doesn't this
>upturn still fall far short of Golden Age profitability?
Not far short, but short, yes. But a lot higher than 20 years ago.
> (And didn't
>it leave the rest of the world behind during the late 1990s
>volatility and general slowdown?)
Japanese profitability is in the tank, but EU profits aren't. They're not as buoyant as U.S. profits have been, but they're not in a Japanese funk, either.
>
>>- so the investment was internally financed,
>> as usual. A lot of corporate borrowing went to fund stock buybacks
>> and takeovers, which did channel money into the stock market.
>> You'd also have a hard time making the argument for "dramatic
>> downturns in investment/GDP" after looking at this table:
>
>I have different data.
>
>If you check Wall Street (new edn), pp.73-77, you
>find that new capital spending by US nonfinancial
>corporations declined from levels in excess of 8.5% of
>GDP during the 1950s-60s, to less than 7% during the
>1970s, to 4.7% during the 1980s, before recovering
>slightly to 5.3% from 1990-97.
You're averaging the 4.5% figure for 1990-94 and the 6.2% for 1995-97, right? Several problems - one being that the first is a five-year period and the second is a three-year; two, the 6.2% isn't far below the 6.8% average I show for the entire 1952-97 period; three, the data doesn't include 1998-2000, which were pretty good years; and four, these whole series was rendered obsolete with the latest NIPA revisions, which, among other things, now class software purchases as investments rather than current expenditures (which seems pretty right to me). The table I posted yesterday is the latest data.
> Meanwhile, profit rates
>plus salaries in the US Financial, Insurance and Real
>Estate sector (as a percent of gross investment) soared from
>20-30% returns during the 1950s-70s up to the 35-45%
>range during the 1980s-90s. And the `rentier' share
>(i.e., interest plus dividends) of the US corporate
>surplus (i.e., pretax profits plus interest) rose from
>levels of 20-30% during the 1950s to 30-40% during the
>1960s-70s, to 50-70% during the 1980s-90s.
I never said the rentiers weren't doing well.
>As for the replacement of internal revenue streams for
>debt more generally, the US ratio of all forms of credit
>market debt to GDP was fairly stable, in the 130-150%
>range from 1950-1975. It then soared to 250% over the
>next two decades.
We were talking corporate, not personal, debt, so now who's aggregating excessively?
It seems that corporate borrowing is more likely to go towards funding "financial" activity, like takeovers and buybacks, while real investment is internally funded. So debt is less a matter of replacement than supplementation. Corporate debt, that is; I'd be the first to say that people are using debt to maintain or expand consumption.
> And that credit bubble emerged
>notwithstanding dramatic increases in the price of money
>(real interest rates), again showing how financial
>returns were up over a period of relatively low
>(compared to 1950s-60s) profit rates derived from
>surplus value extraction (`productive' activity, which
>doesn't show up well in your excessively aggregated
>profit stats, Doug, as I've pointed out to you on the
>e-debate list):
>
> Returns on financial assets:
>Decade Real i Stocks Bonds
>1940s -3.2 4.9 -1.1
>1950s 1.0 14.2 -4.1
>1960s 2.2 4.4 -2.7
>1970s -0.2 4.2 -7.4
>1980s 4.8 10.2 7.4
>1990s 4.1 11.0 9.2
The chart on p. 324 of Wall Street, which is where I'm guessing you got the first column (real long-term bond rates), shows that in the second half of the 19C, real rates were 5% or higher, which was a time of high - excessive even - real investment. So I don't think that you can argue that high financial returns are incompatible with high levels of investment.
> > > At the same time, the
>> >necessary (so far partial) "devaluation" of overaccumulated capital
>> >gets moved around (spatially and temporally), and price inflation is
>> >just one of many forms of deflation.
>> Devaluation maybe, but deflation is a pretty different beast from
>> inflation, as any debtor or creditor could tell you.
>
>"Pretty different" from the standpoint of devalorisation of
>overaccumulated capital? Not really. Deflations can do it quickly and
>sharply, and inflation in a slow and differentially painful way.
Inflations, as long as they don't get out of control, can occur with relatively decent growth rates and low unemployment rates. Deflations are usually associated with economic collapse. Also, there's a big diff in how the classes perceive the two phenomena; rentiers like deflations and hate inflations, while workers have a different view.
> But
>these are both forms of devalorisation, aren't they not?
In an inflation, certain types of capital - resources, real estate - can do quite well. So the distributional effects of the two modes of devalorization are different.
> (Check
>Harvey's Limits to Capital on this for a more profound argument.)
>I appreciate your interest in correcting me, Doug. But there are
>still holes in your critique.
Never thought I was pore-free.
>Let me sum up. My argument (which I think is consistent
>with Das K) is that financial and commercial circuits
>of capital move devaluation of overaccumulated capital
>around spatially, thus serving as the catalyst for
>much of the contemporary globalization of capital. And
>simultaneously, overaccumulation is addressed
>temporally, through hastened speed-up processes and,
>crucially, by expanding a credit system which permits
>traded goods to be purchased today but paid for later,
>on the assumption that future streams of surplus value
>can be extracted and realised. Thus as
>overaccumulation persists and devaluation is shifted,
>labour, women (as workers and in the labour
>reproduction process) and the environment are all more
>frenetically exploited.
Hmmm, I get nervous when women and the environment are mentioned in the same breath. I get in trouble whenever I say this, but you could argue that women are better off for entering the paid labor force than they would be staying at home with the family. So while they enter "exploitation" in the Marxian sense, they may perceive their lives as having improved somewhat. And in the First World, I don't think there's much doubt that most women are better off in 2001 than they were in 1951.
> This happens more to the South
>than the North, thanks to territorial power
>differentials, though virtually no corner of the earth
>has been exempt. The contradictions intrinsic to
>capitalism are, however, not resolved in the process.
>They are instead moved, delayed, and ultimately
>amplified. Which is why I think a crash is probably
>the only basis for clearing away the economic deadwood
>represented by the overaccumulation problem.
We'll see, won't we?
Doug