[lbo-talk] An Orgy of Speculation?

Dissenting Wren dissentingwren at yahoo.com
Tue Mar 8 10:48:01 PST 2011


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 ___________________________________ http://mailman.lbo-talk.org/mailman/listinfo/lbo-talk



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