[lbo-talk] An Orgy of Speculation?

[Dissenting Wren]

I don't think that the core argument of _The Economics of Global Turbulence_ is 
functionalist at all.  Brenner identifies a straightforward causal mechanism 
that accounts for overproduction and falling profits in a given line of 
production.  As new entrants in a line of production adopt the most recent 
technical innovations that lower the costs of production, firms with fixed 
investments in older, less productive technology must meet the price of the new 
producers in order to stay in business.  This lowers their rate of profit.  Why 
don't they simply adopt the new technology themselves or move into other lines 
of production?  Because their fixed investments represent sunk costs.  As such, 
the firm's rational strategy will be to continue producing in its current line 
of production as long as its rate of profit on current capital outlays is at 
least as high as that available elsewhere.  This argument may be wrong, but it's 
not at all functionalist.  (And Brenner nowhere predicts the demise of 
capitalism.)

As for Brad's argument that the problem with Brenner is lack of evidence for his 
claims, I'm simply at a loss.  It would be hard to find another work whose 
argument hews so closely to fine-grained analysis of data.  You may argue that 
he needs more powerful techniques of data analysis (e.g., econometrics), but he 
makes no claims without reference to supporting data.  Anyone who thinks 
otherwise just hasn't read the book.

[WS:] _The Economics of Global Turbulence_ seemingly departs from that line
of thought toward economic functionalism against which he used argue.
Trying to prove his point that capitalism has a systemic flaw, Brenner
dismisses the claim that decline in profit rates resulted from the
power of labor to demand higher wages.  While this claim is not
particularly difficult to dismiss (everyone knows that power of unions
and wages have been going south in the second half of the 20th
century) - it also stipulates that the power balance between
capitalists and labor is inconsequential - which is a very different
argument than the one he proposed re. the origins of European
capitalism (where power and institutional arrangements were the key
explanatory factor.)

I can also see why Brad interprets Brenner in economic functionalist
terms (i.e. logical properties of the system leading to its real world
demise) - albeit one can also argue that there is enough institutional
stuff (cf. the developmental states) in Brenner argument to deflect
the charge of simple functionalism.  The international competition
with developmental states - which Brenner identifies as a key
institutional mechanism responsible for falling profit rates - does
not have to lead to the eventual  demise of the system - it can merely
increase its transaction (i.e. "maintenance") costs.  Arguably this is
not a fatal flow - it can continue to exist until a way of reducing
these transaction costs is found.  What is more, this transaction cost
reduction does not need to abolish capitalism, it can strengthen it
just as the Keynesian  innovation did.

So for these reasons I am not quite convinced by Brad's claim that
Brenner falls into the pit of marxist functionalism predicting demise
resulting from logical contradictions.  However, he seem to venture
dangerously close to this territory.

Wojtek
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