File spoon-archives/marxism-international.archive/marxism-international_1997/marxism-international.9706, message 479


Date: Thu, 26 Jun 1997 22:22:59 -0800
From: djones-AT-uclink.berkeley.edu (rakesh bhandari)
Subject: M-I: OCC


Forwarded from the progressive economists network.
_______________________

Here,Doug presents a pardox by saying: "But we're talking
about the country that's been the dominant capitalist power for almost a
century. Isn't the OCC supposed to rise over time?"

I will try to untangle this paradox.
1. The OCC has been rising for the United States since the 1950s. According
to statistics that I have compiled from FORTUNE 500 LARGEST INDUSTRIAL
CORPORATIONS, the K/L ratio in real dollars rose from $14,000 in 1954 to
$232,000 in 1993. Similar rise is observed in K/L for the 50 LARGEST
INDUSTRIAL CORPORATIONS, from $70,000 in 1959 to $281,000 in 1994. The OCC
does rise over time for the US as well as for other OECD countries. From
this we cannot generalize for every sector, but I believe it is a general
tendency, except in services.

2. The cross-country statistics cited by Doug for 1996. I do not know
whether K/Y is declining for the US over long period or just the short
period. If the K/Y is declining for some time, then the answer  should be
sought in "Hollow Corporations." As BUSINESS WEEK says, "Large segments of
American industry. . . have been abandoning manufacturing in the US. They
have, in effect, become collections of hollow corporations that serve as
assemblers and distributors for components or entire products made abroad.
This trend is sapping the vitality and undermining the future of US
industry. . . . The message is simple. US producers can compete more
effectively with their foreign rivals by making an ironclad commitment to
manufacturing. By investing in the US rather than abroad and moving as
quickly as feasible to computer-integrated manufacturing, they can regain
their comparative advantage in quality and cost."

3. Marx's counter-tendencies: I appologize for long digression here, but it
is important to make my point clear. As we know capitalism as a social
organization is a class society and the class relationship between capital
and labor is fundamentally antagonistic, and this antagonism leads to class
struggle over the distribution of surplus value as well as working rules.

        At the center of capitalism lies production for market, and
capitalist production is driven by profit. The search for profit is the
primary occupation of the owners of capital. Competition for profit is the
driving force of capital accumulation, and the rate of profit is an
important gauge for accumulation and investment decisions in various
industries and regions. Since capital accumulation is motivated by
profitability, declining profitability means declining rates of
accumulation and increasingly fierce competition among (national and
international) capitalists for markets, materials and cheap labor-power.
However, capitalism is a powerful and highly flexible social structure.
Capitalists never lay dead, and they have strategies in their possession to
deal with a profitability crisis. When they succeed in doing this,
profitability may return to revive their ability to invest in new means of
production.

        According to Mandel, " The rate of profit can fluctuate under the
influence of countervailing forces. Constant capital can be devalorized,
through 'capital saving' technical process, and through economic crises.
The rate of surplus-value can be strongly increased in the short or medium
term. . . . capital can flow to countries (e.g. Third World ones) or
branches (e.g. service sectors) where the organic composition of capital is
significantly lower than in the previously industrialized ones, thereby
raising the average rate of profit."

        Shaikh says that "various counteracting influences act to slow down
and even temporarily reverse the falling rate of profit. Higher intensity
of exploitation, lower wages, cheaper constant capital, the growth of
relatively low organic composition industries, the importation of cheap
wage goods or means of production, and the migration of capital to areas of
cheap labor and natural resources can all act to raise the rate of profit
by raising the rate of exploitation and/or lowering the organic composition
of capital. But precisely because the counter-tendencies operate within
strict limits, the secular fall in the rate of profit emerges as the
dominant tendency ."

        According Foley , Marx had five counter tendencies to the falling
rate of profit:  "The First counter tendency listed by Marx is in fact the
possibility that the rate of exploitation may rise as a result of a fall in
the value of labor-power with the rising productivity of labor. This
possibility has already been analyzed by Marx in his discussion of relative
surplus value. . . . but there is certainly the possibility in real capital
accumulation for the basic pattern of rising labor productivity, a rising
rate of surplus value, a rising real wage, and a falling rate of profit
that seems to be inherent in Marx's analysis. The Second counter tendency
Marx lists is the depression of wages below the value of labor-power in
cases in which capitalist can gain a temporary advantage in their
bargaining with workers. . . . The Third counter tendency is considerably
more important. It is the fact that the general increase in labor
productivity will lower the value and price elements of constant capital. .
. . The Fourth counter tendency Marx calls relative overpopulation--the
emergence of unemployment as workers displaced by technical change. . . .
Finally, Marx points out that foreign trade, if it makes available either
cheaper elements of constant capital  or cheaper means of subsistence, will
tend to reduce production costs for capital and sustain the rate of
profit."

        We see from Mandel why the US has low OCC, because the US is the
most service oriented economy in the world. Service sector has lower OCC
than manufacturing, mining, and agriculture. Also Shaikh sheds light to why
the OCC might be low.  We also see the samething from Foley's third and
last point.

4. Comparing the US with other OECD countries.  If the statistics cited are
true in the long run, that is, K/Y for the US is lower than her
counterparts in competition, then the explanation lies in the Leontief
Paradox mentioned earlier by Paul Phillips. That is, according to the
paradox, the US is not a capital endowed, as commonly believed, but labor
endowed country.

Fikret.



++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+Fikret Ceyhun                                  voice:  (701)777-3348 work +
+Dept. of Economics                                     (701)772-5135 home +
+Univ. of North Dakota                          fax:    (701)777-5099      +
+University Station, Box 8369            e-mail: ceyhun-AT-badlands.nodak.edu +
+Grand Forks, ND 58202/USA                                                 +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++




     --- from list marxism-international-AT-lists.village.virginia.edu ---

   

Driftline Main Page

 

Display software: ArchTracker © Malgosia Askanas, 2000-2005