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

Philip Pilkington pilkingtonphil at gmail.com
Sat Apr 11 18:42:04 PDT 2009



>
>
> By 'zombie capital' I'm referring specifically to the physical plant
> Brenner claims remains in use for years despite being unprofitable
> relative to new physical plant, or relative to physical plant newly
> located in lower-wage-cost areas. So it doesn't do its own
> re-investing. Rather, Brenner's argument is that so long as revenue at
> least covers the user cost, its owners will keep it running even if
> it's at below-average profitability because the purchase cost is
> already 'sunk'. The counter-argument is that while this is certainly
> true for a while, Brenner greatly overestimates depreciation time.
> Hence 'zombie capital', or undead plant.
>

No, its nothing to do with "user cost"... its to do with "circulating capital". He claims that if a capitalist has invested a certain amount within a plant and this plant is undermined through competition the original investor will continue their investment because its already laid.

Let's go archaic... I build a railway. In order to do so I take out a load of debt. Two years later someone builds a railway for less money that's faster and more efficient due to (lower labour costs/technological innovation). What do I do? Do I default...

Or... do I continue to try and run my railway to try and make as much as possible OUT OF MY ALREADY FIXED CAPITAL????



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