[lbo-talk] Fitch and Brenner

Philip Pilkington pilkingtonphil at gmail.com
Mon Feb 23 08:38:00 PST 2009



>
> So Brenner is saying:
>
> (1) There was a crisis of profitability due to overcapacity
> (2) The profitability crisis forced capitalists to cut wages and social
> spending
> (3) The wage cuts led to insufficient aggregate demand
> (4) To address the demand problem, the authorities engineered or permitted
> a series of bubbles which allowed the growth of household credit to
> compensate for workers' declining wages
>
> Here's the problem: There has been no reduction in wages. There's been a
> redistribution of wages from low-paid to high-paid workers. The wage share
> has not declined. It just hasn't. Here is the wage share of total corporate
> wage-and-profit income by decade since 1930:
>
>
> all corporate nonfin corporate
> 1930's 87.7% 89.7%
> 1940's 75.5% 76.3%
> 1950's 77.0% 78.4%
> 1960's 78.0% 79.6%
> 1970's 83.2% 85.2%
> 1980's 85.7% 87.0%
> 1990's: 83.5% 85.9%
> 2000-07 83.9% 86.4%
>
>
>
> Clearly, capitalists have *not* been cutting wages in order to restore
> profits. Wages of some workers have no doubt been cut to boost the pay of
> managers and executives. But the pay of managers and executives is not a
> part of corporate profits. Every dollar of extra income captured by a CEO is
> a dollar that *could* have gone to the shareholders' profits in the form of
> higher dividends, or retained earnings, but did not.
>
> Brenner has been promoting the idea of a long-term crisis of declining
> profitability, due to overcapacity, for the past decade. Then this crisis
> happened and now he wants to show that his overcapacity thesis can explain
> the crisis. So he's constructed the causal chain above. Now, I think it's
> true that stagnating wages - for some workers - created a dynamic favorable
> to the unsustainable growth of consumer credit (which was a cause of the
> crisis). But if Brenner were to acknowledge that those stagnating wages were
> actually caused by rising inequality *within* the wage bill - not a
> redistribution from wages to profits - it would derail his whole effort to
> pin the crisis on the dynamics of profitability. For God's sake, Brenner
> would sound like Louis Uchitelle! Can't have that. This dilemma has ended up
> crippling his analysis.
>

I'm totally agnostic when it comes to Brenner's argument; its fascinating and, it would seem, a great stimulus for debate, but I'm no "disciple". In saying that I think that you may be painting an over-simplistic view of the structure of Brenner's argument. It seems to me that you've constructed a "causal chain" where there is, in fact, none. Brenner's argument seems to be more (dialectally?) interrelated than the 1, 2, 3, 4 process you put forward above.

As far as I can see his argument begins with the empirical historical claim that there was a crisis of profitability which began between 1965 and 1973. He then claims that the capitalist class responded in the following manner:

"[F]irms, assisted by governments, throughout the advanced capitalist world engaged in an ever more self-conscious, systematic, and all-encompassing effort to restore their profit rates by means both of the obsessive reduction of costs, above all direct and indirect labour costs, and the transformation of their ways of doing business. They detonated an ever more vicious assault on the organizations of the working-class, so as to force down the growth and, in some cases, the level of compensation and social services. They sought to neoliberalize the global economy by deregulating commodity and labour markets, privatizing state enterprises, and freeing up the formerly repressed financial sector, while seeking to force open markets for commodities, foreign direct investment, financial services, and short-term capital throughout the less developed countries. They shifted capital out of high-cost, low-profit manufacturing lines, especially into the financial services and increasingly turned toward speculation. They stepped up foreign direct investment for the purpose of relocating manufacturing in selected regions of what had been the Third World in order to combine low-cost but increasingly skilled and well-educated labour with the best possible techniques, while meanwhile seeking to profit throughout much of the global South by means of the rapid inflow and outflow of hot money to and from the newly freed-up markets in financial assets." (Brenner. "The Economics of Global Turbulence", p. XXII).

As you can see his argument doesn't just swing around a profit-wage axis, in fact he explicitly dismisses this as the main determinate factor in the long downturn in his "Supply-Side Critique" section, albeit from a different "direction", but for similar reasons that he could dismiss the data put forward above.

"Because supply-side theorists (read: wage-squeeze theorists) explain the long downturn in terms of the operations of institutions and impact of policies, they are obliged to explain it in HISTORICALLY AND NATIONALLY SPECIFIC TERMS" (ibid. p. 24 - my emph.).

Brenner, as far as I can see believes that capital can, in the current geopolitical climate AND the geopolitical climate leading up to the downturn, always manage to outmaneuver labour on an international scale (perhaps this is one reason why his argument gets so much hostility from his colleagues on the left?). When the wage-squeeze thesis is posited it doesn't take into account tendencies of international wages, only those that are "historically or nationally specific". The causal chain you put forward above seems to rely on a similar (reductionist?) rationale.

So, instead he takes a single historical claim and then tries to form an integrative picture of the responses by the capitalist class. So when you say that taking into account the redistribution of wages rather than their outright suppression would call into question his whole argument, I don't think it would.

First of all, the suppression of wages is only a part of his argument, a symptom of or response to the crisis of profitability if you like. He also takes into account many other factors; including the growth of finance and speculation, but these are all seen as either symptoms or responses. Primacy seems to be accorded only to the general tendency for overcapacity/overproduction and the inability for "flabby" firms to move out of their lines of production. THIS is the only constant running throughout the work. Everything else attempts to be empirical/historical.

Secondly, and I'm kind of repeating myself, but, no harm, I'm assuming that the stats you put forward above are only those of US wages versus profits. But Brenner, as I claim above, clearly points out that a major feature of the capitalist response was to "step up foreign direct investment for the purpose of relocating manufacturing in selected regions of what had been the Third World in order to combine low-cost but increasingly skilled and well-educated labour with the best possible techniques". Brenner's analysis tries to be global in scope, rather than simply taking into account economic relations within the US. Again, this aspect is absolutely central to his argument. Hence the: "[F]irms, assisted by governments, throughout the advanced capitalist world engaged in an ever more self-conscious, systematic, and all-encompassing effort to restore their profit rates by.....".



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