On Jul 21, 2007, at 11:57 AM, Rakesh Bhandari wrote:
> Doug, this is how I would respond:
>
>> Profitability has been quite high in the U.S. for the last few years,
>> but investment has been low.
>
>
> But that's Grossman's point. Profits are still
> made (and quite a lot through centralization of
> capital as I have already emphasized), but
> additional investment is pointless. As Rick Kuhn,
> quoting Grossman, puts it: 'instead of
> accumulating the surplus valueŠ - that is,
> incorporating it into the original capital - they
> will earmark it for capital export.' In this
> 'state of capital saturation', '[w]ith no chance
> in production, capital is either exported or
> switched to speculation', which can itself be
> understood as 'inner capital export'.
> http://mercury.soas.ac.uk/hm/pdf/2006confpapers/papers/Kuhn.pdf
As you might have guessed, I have several problems with this argument.
* "Speculation" is thrown around but never examined very carefully. A pension fund buying the S&P 500, a hedge fund moving out of Czech bonds and into German stocks, a dentist trading oil futures, and Steve Schwarzman buying up entire companies all apparently fall under this rubric. But they're all different - economically distinct activities carried on by different groups of people. Is an oil company that hedges with oil futures speculating? Or is it just the dentist?
* The pressure not to invest but to ship surplus cash out to stockholders isn't the spontaneous desire of corporate managers - it's been shaped by the increased shareholder assertiveness of the last 25 years. If a firm invests too much for Wall Street's liking, its stock price will sag, and attract takeover targets. In other words, industry does not "dominate the banks."
* Kuhn via Grossman attacks Lenin's metaphoric use of "overripeness" without adding any detail of his own. (Maybe Grossman offered it; I blush to admit I haven't read Grossman.) Why, if profitability is so high at the average, aggregate level, are we to assume that marginal returns on new investment are prohibitively low?
* Few economies are capital exporters in any simple sense; for almost all, the traffic goes both ways - they both import and export capital.
* Why is the U.S. a net capital importer on such a huge scale? Isn't ours the ripest capitalist economy of all? Why are we importing capital from China, the new kid on the block?
* The U.S. may be attempting to monopolize oil supplies, but China is busily securing its own resources in Africa as we speak. And why is China, apparently in the early stages of capitalist development, already exporting capital?
* What, if any, are the theoretical distinctions between capital import/export via government bonds, private securities, and direct investment?
* How can anyone type a phrase like "capitalism's inherent breakdown tendency" without embarrassment?
Doug