[lbo-talk] revisiting the FROP and the Brenner hypothesis

Philip Pilkington pilkingtonphil at gmail.com
Mon Apr 6 09:28:44 PDT 2009



> Okay, growth slowed "after 1965." It was rapid "before 1973." It was slow
> "before 1945." It was rapid "after 1995." All of these things are true.
> Which one is the long-term dynamic? (And by the way, the post-1995 US prod.
> growth rate still approximates that of the postwar boom even if you measure
> it up to Q1 2009. So that's 14 years and counting. The 1973-95 slowdown was
> 22 years.)

I have to emphasise this point quite strongly in order to put this question to bed. I've noticed that there aren't many historians around here, let alone many economic historians. In fact I'm often struck by the total lack of historical appreciation - but then again many leftists, and many free-marketeers, think they have the "keys to history" in their desk drawer.

Now I'm in no way claiming to be either but I have great sympathy with the historicist method of developing economic arguments. If I'm to be honest I think that most purely logical and statistical analyses of economic development are, frankly, total bullshit. And I really mean that; absolute and total bullshit. They're attempts to use meagre - and I mean meagre - amounts of data and often contradictory logical models to form hypotheses and put forward predictions. These predictions are almost never correct and at the end of the day the only point in even trying to think through these arguments and statistics is to retroactively cast them in some sort of historical narrative. Sometimes general trends can be brought out by this narrative.

My point is that you can't simply take the figures and spout them off in three sentences as evidence. Crafts doesn't do this either and nor would any other economic historian - or historian, for that matter. They would cast them in an overall interpretive narrative. Brenner has done this. And his attempt is recognised by most as very impressive; this even if they disagree. So I'm afraid if you want a total answer - beyond the theoretical one, which is the best I can give you - you're going to have to pick up Brenner's thick historical work and sit down for a number of hours with a highlighter in one hand and a notepad in the other. I promise this will prove more effective than us throwing paragraphs of stats at each other...


>
>
> When there are genuine long-term economic trends, no one needs to argue
> about them. Everyone agrees that the price level has been on an upward trend
> for at least the past 100 years. Everyone agrees the labor force
> participation rate has been on an upward trend for probably 200 years.
> Everyone agrees international trade as a share of activity has been on an
> upward trend since 1945. Yet most people who study the economy look at the
> same productivity statistics as Brenner and don't detect any secular
> slowdown.

This is what makes his work so interesting. And I'm sure after the financial crash you must recognise that, as I said above, economists often have little idea what they're talking about even if they can form a herd.

In addition to this you're ignoring another problem - one which I alluded to above.

At the beginning of his book Brenner points out that after the war there's been a move away from economic history as such. He points out that economists have become thoroughly foundationalist (I would say: arrogant and priestly, but I'm a cynic...) and have, in trying to turn their conjectural discipline into a science have fallen into mathematical abstractions.

I've complained about this enough above. But in response to what you said above it has this consequence:

Economic history is no longer a flourishing discipline. And those few tracts which have been written in the past few years have mostly been done through the lens of the very abstract theories that have attempted to replace real historical enquiry. I presume you understand the methodological difficulties which would arise from this...


>
> Well, the US productivity boom is only partly based on IT manufacturing. It
> also comes from the use of IT by other industries. So, e.g., fewer bank
> tellers are needed now that there are ATM machines and online banking.
> That's a productivity improvement that gets diffused, rather than
> dissipated, by capital goods sales.

Brenner focuses purely on manufacturing production. He gives his reasons for this in the introduction to his book.


>
> From the point of view of a capitalist who is preparing to enter a *new*
> line of production - for a new product that's never existed before - the
> current rate of profit facing *existing* firms is completely irrelevant. His
> profit rate is certain to be as high as it can possibly be, because he will
> (at least initially) have *no* competitors.
>
>
I don't know if Brenner has addressed this or not but having a fairly decent idea of his overall argument I'll give it a go. However, I'm not an economist by any stretch and as always when I try responding to these types of questions I'm doing so with my dick in my hand.

I can only imagine that this type of innovation isn't really that important if we're considering things from the perspective of manufacturing. I mean, sure some firms will come out with a new product or improve on an old one and while this is still new it will generate good profitability (until someone else copies it, of course, then the "Brenner dynamic" gets set in motion). But how much of our economy is made up of these truly new products?

If we look at the majority of people's expenditure it goes on the "same old" things. Houses - a fixed asset; and we won't even go into the... er... complications of that. Cars - even if we invent hybrids people are still essentially buying cars - and rather too many of them it would seem. Food - new products here seem to be involved in production rather than consumption - the consumption side generates revenue through fashion and "fads". Furniture - again the main driving force on the consumption side is fashion here.

Finally we get to the luxury items proper. Laptops, iPods, Blackberrys etc. How much do we really spend on these? I'd say, relatively speaking very little. Not only are these innovations quickly copied and thus presumably brought under the sway of the "Brenner dynamic" but they probably make up very little of our actual economy in the way of products.

What you're talking about probably accounts for very little in the way of manufacturing profitability. It seems to me that you're giving into the "Po-Mo" tendency to view the supposed innovation in living in the past 30 or so years as something tangible when really, for all its glamour, its rather superficial. No doubt our lives have been changed drastically, but our economic habits? Probably not so much. And even if they have we're still only talking about the economic habits of a portion of the globe. The other portion still aspire to buy tractors and ride trains in relative comfort... and its a big market out there!



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