> > Date: Sat, 6 Jan 2001 14:43:02 -0500
>> From: Doug Henwood <dhenwood at panix.com>
>> Actually I don't know where the real investment went over the last
>> few years. Do you?
>
>No, sorry, maybe Robert Brenner is pulling this info together?
Actually I don't think anyone has this data. It's not in the national income accounts. It may be in some other more obscure series, but not for a while.
> I only
>know South Africa dynamics. It's a revolting tale, full of rich white
>swine decapitalising industry/mining, and running their apartheid-era
>funds into numbered accounts across the world's offshore banking
>centres (see Elite Transition, from Pluto, 2000, for gory details).
>On the real side, we've had net foreign direct disinvestment since
>liberation in 1994, plus on the financial side, terrible portfolio
>tidal waves in and out, with three episodes ('96, '98 and '00) of 25%
>currency crashes.
>
>> a firm like
>> Ford that finances purchases of its own vehicles is capturing profits
>> its bankers would have gotten in another era,
>
>Hang on, last I checked (ok, 11 years ago when I wrote a piece on
>this for Multinational Monitor), Ford's financial-sourced profit
>stream wasn't impressive from vehicle financing (they did
>interest rate discounts to help move their stock), but instead came
>largely from Nationwide S&L (is that still the US' largest home
>mortgage depository institution?)...
Ford sold Nationwide years ago. According to their latest 10-K <http://www.sec.gov/Archives/edgar/data/37996/0000037996-00-000019.txt>, their financial services activities consist of Ford Motor Credit Company ("vehicle-related financing, leasing and insurance") and The Hertz Corporation ("renting and leasing of cars and trucks and renting industrial and construction equipment, and other activities"). They sold 7.2 million vehicles worldwide in 1999. The vehicle division made a pretax profit of $8.4 billion in 1999, and the financial, $2.6 billion.
I think the whole "hollow corporation" thing was much more relevant in the 1980s than the 1990s. U.S. manufacturing has made a substantial recovery, and the industrial Midwest has some of the lowest unemployment rates in the country.
> > and financial profits
>> are redistributions from profits of production
>
>No, Doug, not if those profits are acquired simply through
>M-M', i.e., money blowing out of and into a speculative bubble,
>right?
So where does the increment between M and M' come from? Some of it is pure foam - capital gains. But a lot of it comes from interest, dividends, and the proceeds of stock buybacks and takeovers, which divert money from what Keynes called the industrial circulation into the financial circulation.
> > so you could still
>> say that the overall rate of profitability of U.S. capital is
>> substantially up over the last two decades.
>
>Well sure, we can say that whenever there's a profitability problem,
>you find capital frantically
And sometimes successfully...
> invoking countervailing tendencies (not
>just relative and absolute surplus-value extraction, but a whole
>range of tactics to move the overaccumulation problem around through
>time and space). What is more interesting is whether higher rates of
>overall US corporate profitability -- esp. at a time when the wage
>share is rising again after the 1975-95 crash -- are truly a
>function of surplus-value extraction, or whether the profits are
>partially (and increasingly) bogus, based on the Ponzi pyramid scheme
>known as the US financial system.
Why is it an either/or thing? Why can't the speculative mania rest on a foundation of really improved real sector profitability? The last turn-of-the-century bubble, around 1901, was based on the emergence of the modern large corporation; the 1920s bubble was based on radio, automobiles, and the development of consumer credit; etc.
> > > 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.
>
>Damn it, Doug. That's why people accuse you of never leaving the
>Upper West Side. I said "rest of the world" and you gave me a tiny
>corner characterised by hedonistic consumption norms and malevolent
>geopolitical power. Come around to Johannesburg and I'll show you a
>national per capita standard of living that today is precisely where
>we were in 1961. And there's far worse decline just north of here.
As Noam Chomsky said in a very different context, that's true but irrelevant. First of all, I don't have to travel very far in NYC to see some pretty intense poverty. And second of all, what you're describing is in no small part the "hidden underside" (as Slavoj Zizek said in a very different context) of the improvement in profitability: an intensification of imperialism. I thought the creation of poverty alongside wealth was an ancient feature of capitalism. It doesn't mean the system is working badly; it means it's working well. From the point of view of the bourgeoisie, the compression of world incomes seen in the 1960s and 1970s were a problem to be solved by monetarism and militarism.
>So? There are always little upticks within a broad cycle. The point
>is that 1952-70 was a high investment era, and the 1980s-90s was a
>sickly period, off from the earlier 8.5% range to around 5%.
I'll reprint the table, and let readers decide.
U.S. NONRESIDENTIAL FIXED INVESTMENT % of GDP, period averages
total structures equipment 1929 10.6% 5.3% 5.3% 1930s 6.5% 2.6% 3.8% 1940s 6.7% 2.4% 4.3% 1950s 9.4% 3.7% 5.7% 1960s 9.8% 3.7% 6.1% 1970s 11.1% 3.9% 7.2% 1980s 12.1% 4.3% 7.8% 1990s 10.8% 2.9% 7.9%
> Can't we
>talk in terms of an era (even if decade isn't the right unit of
>analysis)
1952-70 9.7% 3.7% 6.0% 1980-2000 11.8% 3.6% 8.1%
> in relation to the accumulation process? I think, based on
>these simple data (which I'd guess are pretty typical of
>world-economy investment rates), that the economic logic of US fixed
>capital investment declining from Golden Age peaks is impeccable, and
>we should face up to that.
> > 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).
>
>Really? I thought your book on the New Economy fetish will debunk
>the idea that there would be enormous surplus-val
"Enormous," no. Greater than zero, yes. Is there any conceptual reason why software isn't an investment? A computer is just a useless paperweight without it.
> I wouldn't contest
>that s.v. gets extracted in more innovative ways through CAD and
>other technical innovations, but still, for these kinds of
>longer-range comparisons (over decades), isn't it fair to compare
>apples and apples? So adding a new investment category, software, as
>if it were uniformly the same kind of investment as, say, a machine
>tool, seems dubious, no?
So should we not count telephones as investment because they didn't exist in 1870? Innovation is so central to the capitalist process that I don't understand how you could say that.
> (And have earlier investment data, dating to
>the 1970s, been corrected to account for the new definition?)
Yes, in a major revision, the whole series is refigured.
> > I never said the rentiers weren't doing well.
>
>So, what does that tell you about the character of the accumulation
>process these past two decades, Doug? Sustainable?
Dunno. It's sustained itself a lot longer than skeptics - including the former me - have thought likely.
> > 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.
>
>But higher corporate debt bought back equity in a context in which
>P/E ratios were, through the 1990s, at historic highs. It's still a
>speculative-cum-Ponzi phenomenon (in the strict Minskyian sense), no?
Yes. How this corrects itself is the big political economy question for the next few years, too. You could have a sustained bear market, or a sustained Japanese-style stagnation - all without "a big crash."
>But comparability? Accumulation in the late 19th century US entailed
>extraordinary unevenness, with the rise of the corporate form, the
>beginnings of massive centralisation and concentration of capital in
>key manufacturing and financial subsectors, periodic bank failures
>(maybe justifying the relatively higher risk associated with
>lending/borrowing money), and indeed periodic system-wide crashes
>until JP Morgan established the Fed in 1910 as a bailout mechanism.
It was the whole industrialist and and financier class that created the Fed - a process that was in no small part responsible for the creation of that class as a for-itself class. And a damned successful "bailout mechanism" it's been.
>It was, as Hilferding described it, a period of immaturity,
And today might look like a period of immaturity to someone writing in 2060.
>But I'm glad history's on your agenda. Let's do geography too.
Sure. Imperial looting and murder have been part of capitalism since its birth.
>What's the point? The reason for the cholera outbreak was that poor
>households couldn't pay their rural KwaZulu municipality a new $6.80
>connection fee, and so heartless bureaucrats cut their supply off, so
>more than 1,000 households were forced into dirty rivers for their
>water/sanitation, and things spread rapidly from there given the
>lack of reticulated water systems in the vicinity.
And the British cut the legs off Kenyans who weren't working hard enough.
>So what
>looks to you, Doug, like sustainable, vibrant, energetic, and dynamic
>NY-centred capitalism (until very recently) sounds to me, instead,
>like a giant sucking sound.
I've never denied this for a second. I've just ended a year during which I spent lots of time in Bedford-Stuyvesant, a very poor neighbhood in Brooklyn, where there isn't much vibrancy, energy, or dynamism either. This is how capitalism works, and always has. The rentier elite doesn't give a fuck about misery, whether it's a mile away or 10,000 - as long as the miserable don't disturb their plush sleep. Misery is the very condition of possiblity of their excess, in fact.
> Come round to Jo'burg this year and we'll
>do some touring of those articulations of modes of production, and
>you'll be more sympathetic to the merits of crisis theory. Jo'burg
>was just named as the site for the Rio+10 conference ("World Summit
>on Sustainable Development") in 2002: what an appalling irony. Come,
>let's make a mess of that conference, the way They do of our lives
>here.
I'd love to, but the cheapest roundtrip ticket to Jo'burg is $1,405, so I'd need a bit of help.
Doug