That capital equipment is only worthless within the valuation system of today's economics. Surplus equipment often *has* value for the whole chain of used equipment purveyors. There's something perverse in the whole MBA valuation model. Skilled workers have no value, for example. That comes to mind since I was laid off today in the semi-equipment industry. My crime is that of being a "highly compensated employee"; HCE in employment law. But one thing that's always interested me is the NOL provision in the tax code. I remember seeing Barlett and Steele in person at College of Marin in about '92. One of the things these journalists (and tax code technicians) talked about was the giveaway that the "net operating loss" provision gives to business. It's what gives well-off companies a way out of paying their fair share of taxes (simplistic, I know). So for what D. Davies wrote: "I've never been able to understand how physical objects can be a drag on the economy merely by existing. I can see how they are worthless..." it's just that those physical objects are part of the perverse valuation and tax models. Or they're so dirt poor they can't even take advantage of the NOL clause (okay, a reach, I'm not an MBA).
-Steve Grube
==========================
Daniel Davies wrote:
>
> --- Doug Henwood <dhenwood at panix.com> wrote: > Brad Mayer wrote:
> >
>
> > Remember, though, that a lot of this surplus capital equipment
> > becomes obsolete very quickly, so while it may represent a big loss
> > to the people who bought it (or financed it, in the case of busted
> > IPOs), it may not represent the same economic overhang that a bunch
> > of redundant steel mills would have a generation or two ago.
>
> I must confess to the guilty secret that I have always had a blind spot
> for this argument. I've never been able to understand how physical
> objects can be a drag on the economy merely by existing. I can see how
> they are worthless, but the "overhang" argument seems to suggest that
> surplus capital effectively has negative output. Unless you make what
> I would have thought were absurd assumptions about space constraints,
> surely it could just be ignored? Hell, there's always the option of
> putting a couple of sticks of dynamite under the bloody things if
> overhang is so pernicious.
>
> d^2
>
> -- William McGonagall.