<!doctype html public "-//W3C//DTD W3 HTML//EN"> <html><head><style type="text/css"></style><title>National Accounts</title></head><body> <div>Trevor wrote</div> <div><br></div> <blockquote type="cite" cite><font face="Courier" size="+2" color="#000000">If the US has a higher capital stock to</font></blockquote> <blockquote type="cite" cite><font face="Courier" size="+2" color="#000000">begin with it will take a much higher absolute level of investment to move</font></blockquote> <blockquote type="cite" cite><font face="Courier" size="+2" color="#000000">the relative rate of increase higher in the US than in China.  Eg China with</font></blockquote> <blockquote type="cite" cite><font face="Courier" size="+2" color="#000000">a capital stock of 10 would need an investment of 1 for a10 percent increase</font></blockquote> <blockquote type="cite" cite><font face="Courier" size="+2" color="#000000">smilarily the US with a capital stock of 30 would need and increase 3 or</font></blockquote> <blockquote type="cite" cite><font face="Courier" size="+2" color="#000000">three times the absolute investment in capital stock.</font></blockquote> <div><br> <br> </div> <div>But if the absolute mass of surplus value was a direct function of the absolute size of the capital stock, then a greater percentage of surplus value wouldn't have to be capitalized as additional constant and variable capital to maintain the same percentage growth rate in the size of the utilized capital stock</div> <div><br></div> <div>Our compromise may be near.</div> <div><br></div> <div>An unrelated point:</div> <div><br></div> <div>As I have said on this list during the Brenner debate,  the Shaikh/Tonak, Moseley, Dumenil/Levy, Wolff  theory seems to downplay the importance of the restructuring of the international division of labor in the raising of the profit rate in US statistics.</div> <div><br></div> <div>Interested in what Paul has to say about below.</div> <div><br></div> <div><font face="Times" size="+2" color="#000000"> James Galbraith (1989, 1997) has called attention to the restructuring of the international division of labor. The high interest regime imposed by Volcker in the early 1980s induced bankruptcies and forced a restructuring of capital, if not morphological changes in US industrial structure. Galbraith underlines that with each recession firms in the relatively low value added consumer good industries have been shut down and relocated, leaving the US industrial structure top heavy with more highly profitable technological sophisticated industries. Advanced capital goods came to count more in the US's exports (Warner, 1995; Galbraith, 1997). What we have here then is not necessarily a recovery in profitability in the system as a whole but a concentration on the more highly profitable branches within the US. The ability of a nation state to concentrate within its borders more profitable activities does not raise profitability in the system as a whole; it only partially immunizes the successful nation state from the full force of its fall.  As for why these branches are more profitable, Galbraith writes:</font></div> <div><font face="Times" size="+2" color="#000000">"...there is also the way that great individual fortunes are made, the way of creating seemingly instant wealth: by capitalizing on a transient advantage, by creating an indispensable product and reaping the surplus that others are willing to pay--so long as the monopoly holds--in order to own it. This leads in a straightforward direction.  The US position in the global economy and its standard of living have depended on its ability to continue substantially to dominate world production of capital goods, of the machinery and equipment that flow into the industrial process.  Further, that ability depends on its capacity to generate and sustain the expansion of an investment goods-producing sector serving a world market. Why capital goods? Because capital good embody design, and unique design is the essence of scarcity value. The machinery and equipment used in the production of goods and services--and not the final act of production itself--are what determine which technologies, which systems, become the basis of consumer life in the industrial world.  For this reason, technical superiority in capital goods is the quintessence of advanced development, the ultimate rent-yielding activity. Superiority here is the one thing that cannot be emulated by a developing or industrializing nation or even a second-rate industrial power, not can it be undercut by low-wage competition.  it is therefore the one thing that guarantees and advanced nation a high standard of living. </font><br> <font face="Times" size="+2" color="#000000"></font></div> <div><font face="Times" size="+2" color="#000000">In short, the apparent recovery in US profitability does not weigh against the underlying force of the law of the tendency of the rate of profit to fall: the recovery has required an assault on the working class and still has only been partial and dependent presently on artifical stimulus, and it has compelled US capital to exit from entire branches of production on account of their low profitability, thereby leading to a process of de-industrialization and downward mobility which has in part been characterized by whites driving minorities out of position that the former had tended not even to want.</font></div> <div><font face="Times" size="+2" color="#000000"><br></font></div> <div><font face="Times" size="+2" color="#000000">That some sectors--medical equipment, design and logic microchips, pharmaceuticals, software, aerospace, CAD equipment, etc.--have remained profitable hardly speaks to the heath of the system as a whole.</font></div> <div><font face="Times" size="+2" color="#000000"><br></font></div> <div><font face="Times" size="+2" color="#000000">Finally there was in fact a  serious drop in profitability between 1997 and at least 2002, and we are now only realizing  that it may have been and may be deeper than companies with their eyes on the stock market were or are still letting on.</font></div> <div><font face="Times" size="+2" color="#000000"><br></font></div> <div><font face="Times" size="+2" color="#000000">The theory of the falling rate of profit is not obviously empirically invalid in spite of the partial recovery of the US profit rate since the 1980s  and may remain the force that explains the consolidation of the very forces (anti labor legislation, industrial restructuring, currency devaluations) that overcame it, at least for certain groups of capitals.</font></div> <div><font face="Times" size="+2" color="#000000"><br></font></div> <div><font face="Times" size="+2" color="#000000">But obviously my understanding of industrial restructuring is more highly indebted to Galbraith's post Keynesian work than that of Marxist scholars.</font></div> <div><font face="Times" size="+2" color="#000000"><br></font></div> <div><font face="Times" size="+2" color="#000000">Perhaps I am not a Marxist, after all.</font></div> <div><font face="Times" size="+2" color="#000000"><br></font></div> <div>Rakesh</div> <div><br></div> </body> </html>