File spoon-archives/marxism-international.archive/marxism-international_1996/96-12-19.094, message 71


From: Patrick Bond <pbond-AT-wn.apc.org>
Date:          Wed, 18 Dec 1996 21:09:30 +0000
Subject:       Re: M-I: Rate of Profit


Says Doug:

> ...Financial and
> industrial investment are done by different people employed by different
> institutions. GM managers didn't wake up one day and say, "The hell with
> this car stuff, let's play games with the baht-ringgit exchange rate." They
> still make lots of cars, and make lots of money making cars. 

During the 1980s (when I was paying a bit more attention), 
weren't they making more money from GMAC and 
First Nationwide assets, since they could redirect profits that 
otherwise would have been reinvested in the glutted auto market into 
high-yielding mortgages?

> Second, profit
> rates are up from 1970s lows in almost every OECD country except Japan.
> Third, the average OECD rate of return is over 16% - over 18% in the U.S. -
> which is twice the long-term average return in the U.S. stock market, and
> three times the long-term return on government bonds. 

Can you break this down a bit more? Are corporate treasurers and 
portfolio managers investing for the long-term, or instead (as you 
suggest next regarding shareholder control) for the short-run impact on the 
quarterly statements? How has the short-term Dow performed in 
relation to fixed capital investments?  

> Fourth, the rise in
> financial power has to be analyzed as the increasing assertiveness of U.S.
> and other institutional shareholder, an assertiveness that has come with
> their increasing dominance of the financial markets, replacing the
> dispersed shareholders of yore. 

I would have said that the power shift from productive to 
financial circuits was discernable first in the form of greater 
spatial mobility (stemming especially from the 
1960s liberalisation of the Euromarkets and then the 1970s recycling of 
Petrodollars), and then in the form of Volcker's 1979-80 interest rate 
ratchet, with all that it implied for financial power over debtors 
everywhere. And only then, came Wall Street's ascendance. No? 

> Fifth, productive capital is a surprisingly
> light user of external credit, financing almost all its investment
> internally - so this "temporal fix through credit" needs to be fleshed out
> a bit more. Just because capital's ideologues treat financial capital as
> the sole representative of the breed, we needn't accept that.
> 

It's all relative, eh? Productive capital is more in hock to 
financiers than in previous decades (having not entirely worked off the junk bond, 
LBO and general rise in debt from the 1980s); and is more prone to 
substitute financial acquisitions and treasury room operations for 
investment in plant and equipment than was the case in earlier 
decades; and is also more reliant upon increasingly-indebted states 
and consumers (and other firms) for customers than was the case 
previously. All debt indicators are up substantially from the early 
1970s, right?

So referring to the the temporal fix offered by finance is another way of saying you 
can mop up overaccumulation today by consuming but putting off 
payment (and hence further surplus value extraction) until another 
time. Wouldn't you say that this has been a valuable tactic for 
global K to displace crisis tendencies?

Ciao!
Patrick Bond
National Institute for Economic Policy
PO Box 32848 Braamfontein 2017 South Africa
(2711-403-3009 * fax 339-6395)
or
51 Somerset Road
Kensington 2094 South Africa


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