> I was at the Historical Materialism conference in London back in November,
> and this point was heavily debated. It came to a climax at the plenary
> session on the crisis, with Brenner, Gerard Dumenil, David McNally and
> Costas Lapvitsas (who was meant to be discussant but pretty much ended up
> giving a complete paper of his own). At an earlier session Dumenil had been
> mocking the idea that 'the profit rate had to be behind the crisis'. He
> pointed out that some people seemed to argue that profits were too high
> relative to profitable outlets for investing surplus (hence financial
> bubbles) while other people seemed to argue that profits were too low, hence
> not enough real investment was taking place. Himself, he thought the crisis
> was of financial origin and that the profit rate had been relatively steady
> and had little to do with it. Coming from Dumenil (co-author of 'Economics
> of the profit rate') this meant quite a lot.
>
> At the plenary session Brenner gave his usual argument and Dumenil ripped
> into his stats. Unfortunately there was no overhead display and Dumenil
> couldn't present his own (Brenner's were distributed to the audience
> beforehand as print-outs). Brenner defended himself and it went back and
> forth a bit, and they concluded that it would be great to have a debate with
> all the stats on the table, but Brenner had to leave the session early to
> catch a flight and that was it.
>
I'm glad to hear that. I hope there'll be a Brenner vs. Dumenil back and forth in print somewhere. Maybe Doug could weigh in with a pronunciamento.
On the distinction between money and financial assets, I was with you right up until the end. You're right, there is a distinction between money and financial assets. But financial assets are just as non-scarce as money is. It's true that there has to be a rise in expectations of future income flows for the value of financial assets to rise. That's exactly what happens in bubbles. And bubbles, as you say, do affect the real economy. They might call forth more aggregate investment (i.e., "temporarily too much"). And they might reallocate investment toward a favored sector. But then, that would be an example of finance causing distortions in the real economy, not the other way around. I don't think we really disagree here.
One point I'm dubious about is the idea of a global savings glut. Sure, there's been a glut of savings in China (and elsewhere), but this has been matched by a deficit in saving in the U.S. That's why there's been such an enormous transfer of saving from over there to over here. The only way I can make sense of the idea of "too much saving" on a *worldwide* basis is if global desired saving were to exceeds global desired investment. That would bring about a shortfall in total spending, and then (global) total income would decline - i.e., a recession would happen. That's exactly what's happening now, during the crisis, but obviously it was not the dynamic at work in the buildup to the crisis.
SA