>
> I'd love to read the article, please send it to me. But I still remain a
> little sceptical that the steel industry stayed perfectly profitable while
> subjecting themselves to the forces of global competition. I mean I call to
> mind here the farming industry. An industry which produces "raw goods"
> perfectly well but needs government subsidies to remain profitable within
> the West. Competition in the raw goods section should, by all accounts,
> erode profitability... if, that is, competition is allowed free reign and if
> competition actually functions properly...
Sure, sending offlist. I can send it to anyone else who's interested too; email me. An extract from the introduction below.
One more thing: A point Dumenil and Levy are always making against Brenner is that there's a big problem involved in arguing that a _sectoral_ decline in the profit rate, e.g., in the manufacturing sector, or part thereof, arising from conditions specific to that sector, can cause a general decline. The problem is that the sector's outputs are always someone else's inputs, so what's bad news for manufacturing producers is good news for those industries that use manufactures as inputs, and/or for real wages. Since Brenner rejects both a wage-squeeze and declining _technical_ capital productivity, the investment overhang, or zombie inefficient capital stock hanging in there and still being counted in the profit rate's denominator, is the only out he has left, so it's left to carry a huge explanatory burden. The point of the Fine et al article is to demonstrate that zombie inefficient capital stock doesn't, in reality, hang in there that long.
Ben Fine, Aristeidis Petropoulos and Hajime Sato [2005]: "Beyond Brenner's investment overhang hypothesis: the case of the steel industry", New Political Economy 10:1, March.
[...]
In short, Brenner’s underlying causal mechanism is deficient in two closely related respects. First, it is far from complete in analytical terms, both in itself and by way of distinguishing itself from, or drawing upon, others. This allows Brenner to be perceived to be underconsumptionist and/or to be relying upon understandings that are compatible with the treatment of microeconomic market imperfections to be found in mainstream economics. Second, the interrogation both theoretically and empirically of investment overhang is scanty and extremely narrow in scope, in terms of what holds it in place and why no remedial action is forthcoming. In a nutshell, it is not too much of an exaggeration to characterise Brenner’s primeval mechanism as being confined to what might be termed a highly physicalist interpretation. We do not wish to parody, but Brenner offers little more that a stylised account along the following lines: ‘There is this incumbent machinery in place that is much less productive than more recent models with higher productivity, and it will not let go and allow itself to be displaced. This holds back the whole economy.’ In a public defence of his position, Brenner referred to his treatment of, presumably non-transferable, intangible assets for the reason why restructuring is fundamentally blocked. But this is analytically weak and equally free of location in a broader theoretical framework encompassing other factors involved as well as their differences in incidence by sector and country. Are intangible assets (or other advantages—and disadvantages—of incumbents over entrants) the same and of equal significance for coal, steel, oil and electricity as for cars and Coke, irrespective of the country and companies concerned? Is the soft drink industry held back by Coke’s longstanding advertising campaigns as formative of intangible assets? Or do these intangible assets only constitute the firm characteristics in their wider economic and social environment—in which case these need to be the starting point for analysis in explaining the dead weight of incumbency rather than a simple and exclusive market mechanism?
Further, a major problem with Brenner’s account is that it is simply too bad to be credible when offered as an explanation over a 30 year period or more. For the sake of argument, assume that machinery is depreciated once every ten years— some obviously more quickly, others more slowly. Then all machinery will have been replaced three times already, more than often enough to see off those old technologies or whatever! At the very least, the story of investment overhang must be accompanied by an explanation for its persistence, involving factors other than the investments themselves. It might be access to technology, markets, finance or whatever, although in ways that obstruct rather than facilitate innovative accumulation.
It is here that those old debates (in the 1970s, over Marxist political economy and its application to contemporary capitalism) had something to offer that Brenner has perhaps overlooked. And it is not surprising that they should do so. For, apart from drawing upon and interpreting Marx’s theory of accumulation, they were born out of a much stronger wish to explain the closer experience of the postwar boom than its, then, recent demise. How was accumulation sustained and why could it not be sustained further? Varieties of answers were offered and, taken together, considerable emphasis was placed on the varied roles of the state, finance, multinational corporations and labour. Our approach focuses closely upon what is termed the restructuring of capital, drawing upon Marx’s notion of centralisation (and concentration) of capital and its implications through production, distribution and exchange. The approach argues that the restructuring of capital materialises in production but can be levered (or not) through corporations directly, the state (industrial policy in the broadest sense), exchange (access to markets and competition), finance (the role of banks in funding and/or directing investment) and labour (through its workplace and political struggles).
>From this viewpoint, the weaknesses of Brenner’s theory can be readily
understood
by considering the level of aggregation at which he operates. Whatever its
validity, the investment overhang argument looks very different in the clothing
sweatshop, the nuclear power industry and deregulated airlines. Is
there a sector
that typifies his argument and, if so, is it typical of the economy as a whole?
His work is more or less free of sectoral reference, let alone study. But across
the various issues highlighted by the restructuring of capital, from production
through technology and finance to trade and demand, the role of the state,
labour and multinational corporations, the dynamic of each sector is different
from any other. Nor is it clear that reference only to Germany, Japan and the
USA is adequate for analysing the world economy at an aggregate or
sectoral level.
One purpose of this article is to revisit Brenner’s theory of the investment overhang (long downturn) through examining the steel industry, not least after the first oil crisis. His approach is shown to be unable to capture the dynamics of the industry as revealed by the restructuring of capital approach. This is despite steel traditionally being perceived to suffer from chronic excess capacity and, hence on the face of it, to be most favourable to the overhang hypothesis. A second and more constructive purpose is to present various important aspects of the restructuring of the industry. The next section deepens the analytical commentary already offered by situating Brenner’s investment overhang hypothesis in a more general framework concerning the restructuring of capital. It then points to the significance of the steel industry for examining the weaknesses of Brenner’s theory. The third section depicts the restructuring of steel in terms of technology and investment. The fourth and fifth sections offer explanations for how exchange (market structure and demand pattern), internationalisation of financial and industrial capital, labour and government have affected the restructuring shown in the third section. Finally, the last section briefly concludes on the wider implications for the study of contemporary capitalism.